Covered Bonds

Deutsche Hypo returned to covered bonds for its annual benchmark on Monday, building a heavily oversubscribed book for its €500m seven year mortgage Pfandbrief in a record 10 minutes.

Two European banks announced covered bond mandates on Monday – La Banque Postale in euros and BayernLB in dollars.

National Bank of Canada is on track to sell a $750m three year covered bond, its first covered bond in dollars since 2011.

Berlin-Hannoversche Hypothekenbank (BHH) mandated leads to market the first green pfandbrief, or Grüner Pfandbrief, setting the stage for further green covered bonds and RMBS due this year and next. In contrast to last year’s environmental and social governance deal from Münchener Hypothekenbank, the forthcoming transaction will be of benchmark size and will be backed exclusively by energy efficient buildings.

The German issuer mandated joint leads for a seven year €500m no grow mortgage backed Pfandbrief on Friday for likely issuance on Monday.

After a week of no euro issuance the primary market in euros is likely to pick up next week, when staffing levels should be back to normal. A mandate decision on a Nordic deal is expected on Friday afternoon and other core euro issuers are close to pulling the trigger. The dollar market remains open despite doubts over the depth of demand in the last deal from Bank of Nova Scotia.

The primary market in covered bonds was active this week, but not in its staple euro market. Canadian issuers came to the fore, supplying benchmark deals in sterling and dollars.

Berlin-Hannoversche Hypothekenbank (BHH) mandated leads to market the first green pfandbrief, or Grüner Pfandbrief. More green covered bonds and RMBS are on the way.

The bullish tone in covered bonds continued on Thursday with successful senior unsecured and corporate deals buoying supply hopes for next week, which bankers expect to be busy.

The Bundesbank and European Central Bank have been actively lifting offers in Austrian covered bonds, with all bar one credit performing strongly since the end of March.

Toronto Dominion issued the ninth sterling denominated covered bond of the year on Wednesday, and the third from a Canadian bank in the three year floating format. The transaction provided better executable funding than it could have achieved in dollars or euros. The issuer followed Bank of Nova Scotia, which on Tuesday priced the third Canadian dollar benchmark of the year, funding more cheaply than was possible in euros.

Primary activity in covered bonds is expected to resume on Wednesday, with high hopes that a deal will be announced later on Tuesday afternoon. Though the secondary market is quiet, bankers reported a much better tone into the close of last week as offers were lifted in recently underperforming deals.