Covered Bonds

Nordea Finland attracted almost equal interest for both tranches of its 5.25 year and 12 year covered bond that was priced with barely any new issue premium on Tuesday. This symmetry to demand defied convention and illustrated strong comfort in the credit which enabled investors to reach for yield with a high degree of confidence.

The UK’s Coventry Building Society spurned the conventional three year sterling floating rate covered bond sector, and following its recent roadshow, sold a five year floating rate sterling benchmark covered bond on Tuesday.

Deutsche Pfandbriefbank (pbb) and Dexia Kommunalbank are both exposed to bonds which are likely to be written down following the debt moratorium issued by Heta Asset Resolution — the Hypo Alpe Adria bad bank — last week. Several other German covered bond issuers are likely to be affected, said Commerzbank analysts. Austrian issuers are also being hit and have been put on review for downgrade by Moody’s.

Muenchener Hypothekenbank (MuHyp) issued the tightest ever 10 year covered bond on Monday with a book that was built in record time. At €750m the deal was much larger than anything seen in Germany in this tenor for several years. The strong uptake underscores the fact that, despite the extraordinarily tight price and large size, the rare transaction offered compelling relative value.

The covered bond world descended on Canary Wharf for the IMN annual covered bond conference this week, for discussions on the credit (or is it rates?) product that still delivers a meaningful amount of FIG funding.

Euro covered bond issuers launched benchmarks this week and showed the unrelenting momentum in the compression of spreads has continued unabated.

Nord/LB attracted a large and well diversified book for its inaugural benchmark sized €500m no grow five year public sector Lettre de Gage on Monday.

Dutch issuer Van Lanschot Bankiers has become the third issuer to set up a conditional pass through (CPT) mortgage covered bond programme, joining NIBC Bank and UniCredit. Pending successful registration with the Dutch central bank, a deal should be coming soon.

The European Banking Authority has closed off all routes around the bonus cap, with new guidance published on Wednesday.

8th Annual Global Covered Bonds Conference

The newly updated covered bond map from The Cover, in conjunction with Société Générale, is now available online and in hard copy.

The Cover interviews Luca Bertalot, head of the European Covered Bond Council, and Carsten Trisbæk Madsen, Chairman of the ECBC, on how covered bonds and dual recourse structures can play a role in Europe’s Capital Markets Union. [Best seen on Google Chrome or the latest version of Internet Explorer]