Covered Bonds

Covered bonds are expected to tighten, as the fall in Bund yields and expectations of lower supply boost sentiment.

Extension risk is no longer a factor in the pricing of covered bonds. Deals auctioned this week in Denmark priced flat to existing bullet maturity deals, while last week ING received regulatory approval for a new soft bullet covered bond programme that issues bonds with extension risk. ING expects to sell these at the same level as its existing hard bullet deals.

Landesbank Hessen-Thüringen (Helaba) tapped the three year leg of its dual tranche issue from May on Thursday morning, mirroring the syndication strategy it used to tap the deal’s seven year leg in July — aggressive pricing and doubling the size of the issue.

Brazil's finance ministry has told GlobalCapital that it will publish proposals for a covered bond legal framework next week. The proposals are a part of an overall package that aims to free up the flow of credit and was presented by the minister of finance, Guido Mantega, on Wednesday. Bill Thornhill reports.

Brazil's finance ministry has confirmed with The Cover that it will publish proposals for a covered bond legal framework next week. The proposals are a part of an overall package which aims to free up the flow of credit. Bankers are hopeful that the timescale to implementation will be quick, but warn that many frameworks have failed to attract the attention of foreign investors, ostensibly due to oversights over minor details.

RBS was unable to attract a sufficient quorum to pass a series of swap amendments to its covered bond programme.

Landesbank Hessen-Thueringen (Helaba) tapped the three year leg of its dual-tranche issue from May on Thursday morning, mirroring the syndication strategy it used to tap the deal’s seven year leg in July — aggressive pricing and doubling the size of the issue.

The Covered Bond Investor Council has published a report which reviews progress in the field of transparency and makes recommendations. The report says there is still a clear need for data that is easily accessible, comparable, and which goes beyond the minimum requirements set by the ECBC Label.

The International Capital Market Association’s (ICMA) Covered Bond Investor Council (CBIC) has responded to a consultation paper that was launched by the European Securities and Markets Authority (ESMA) in July, requesting an alignment of covered bond definitions with existing regulatory frameworks.

The value of your house is a popular subject at middle class dinner parties everywhere, but the far more important loan-to-value (LTV) ratio never comes up.

Tier one covered bonds — those from national champion issuers — in Europe’s periphery are cheap to equivalent senior unsecured notes and with the market in short supply further outperformance is likely. Regulation on the Liquidity Coverage Ratio, declining issuance volumes and a further injection of central bank liquidity should fuel the move. But with the US rate cycle set to turn, the longer term picture is more unsettling.

Nykredit Realkredit opened the Danish auction season on Monday with the sale of Dkr800m of two year covered bonds and Dkr7bn of one year bonds that are structured with a maturity extension trigger. Despite the triggers, the one year portion was oversubscribed multiple times and priced a long way inside swaps which Nykredit was very satisfied with.