Covered Bonds

With investors squealing at this week’s new issues that crunched spreads to record lows, next generation covered bonds could meet the sector’s increasingly desperate need for higher yielding products, writes Bill Thornhill.

Despite a string of successful Austrian covered bonds launched recently, Commerzbank analysts are cautious on the outlook for Austrian banks. The analysts list a number of risks and conclude that there is still a substantial chance of more negative headlines emerging in the next few months.

An open letter to Jonathan Hill European Union Commissioner for capital markets union, a blog post written by Richard Kemmish.

The Monetary of Singapore (MAS) has put out a new consultation paper on covered bonds that aims to clear up several outstanding snags that have held back banks from issuing. But while the MAS has correctly pinpointed most of the problems, what it really needs to tackle is the sticky issue of who has first claim on the asset pool.

Société Générale SFH issued a €500m five year Obligations de Financement de l’Habitat on Wednesday, at the tightest ever spread for a non-German issuer. The transaction was comfortably oversubscribed, and with investors increasingly alert to the risk of thin covered bond supply, the issuer paid virtually no new issue premium.

UniCredit Italy has mandated leads to market its newly restructured conditional pass through (CPT) Obbligazioni Bancarie Garantite covered bond programme and says that a deal may follow.

UniCredit Bank Austria closed the spread gap to one of its Austrian rivals on Wednesday when it priced a €500m 10 year covered bond. The shrinking spread difference speaks to the long term credit curve flattening trend but also shows that worries over Austrian banks’ Swiss franc exposure are no longer being factored in to pricing.

The European Covered Bond Council (ECBC) said that it will host a panel discussion with the European Commission (EC) in Brussels next week. The announcement follows the publication on Wednesday of a consultation document on building a Capital Markets Union (CMU).

The Monetary of Singapore (MAS) has put out a new consultation paper on covered bonds that aims to clear up several outstanding snags that have held back banks from issuing. But while the MAS has correctly pinpointed most of the problems, what it really needs to tackle is the sticky issue of who has first claim on the asset pool.

Fitch expects Australian borrowers to reduce their issuance of covered bonds by A$1.5bn to about A$16.5bn (€11.7bn) this year compared to last. Assuming just over half of this is conducted in euros, as was the case in 2014, the agency’s forecast is broadly in line with the average estimated by five covered bond analysts in December.

Fitch has updated the spreads it assumes for refinancing covered bonds under stressed conditions. Compared to the previous quarter the agency has lowered the cost of refinancing French and Portuguese residential mortgages. The changes will not have a rating impact.

Hypo Real Estate has mandated Citigroup and Deutsche Bank to advise on the sale of Deutsche Pfandbriefbank, a requirement imposed on HRE after it was bailed out by the German state, according to a press release published on Tuesday afternoon.