Covered Bonds

Deutsche Hypo has mandated joint leads for a €500m five year mortgage Pfandbrief to be launched in the near future.

Christoph Anhamm, RBS's head of covered bond origination, is leaving the bank for ABN. Tim Skeet will take over the position.

German bankers, who had been busy nursing sore heads after celebrating their country’s World Cup victory last Sunday night, will not have been overly taxed by DG Hypothekenbank’s drive-by Pfandbrief syndication on Monday. Being the rarest issuer from one of the most technically squeezed jurisdictions in Europe, a strong outcome was never in doubt. Painkillers were however required for the allocation process.

Landesbank Hessen-Thueringen (Helaba) sealed its place as the largest covered bond issuer so far this year after doubling the size of a seven year public sector backed Pfandbrief on Thursday. The approach, which mirrors last year’s strategy, has enabled the bank to raise a lot of funding at competitive levels while giving investors much needed liquidity, as well as minimising its asset-liability mismatches.

Toronto Dominion and BNP Paribas should be ready to launch the Canadian bank’s first legally compliant covered bond next week after announcing the prospective deal on Wednesday. The announcement was not a total surprise, given that the bank’s programme had been signed off by the regulator in late June. However it has removed uncertainty over timing, which bankers away from the deal commended.

Toronto-Dominion is set to issue its first legally compliant covered bond next week after announcing the prospective deal on Wednesday.

Around 90 deals have priced so far this year with varying results. The Cover compares these by the depth of demand, the breadth of distribution and pricing both globally and across each region.

The focus of activity in covered bonds was squarely on Banco Espirito Santo on Tuesday morning with bankers reporting that its one outstanding publicly placed covered bond had widened by 25bp from last Friday. In contrast to the bank’s subordinated debt, which risks being completely wiped out, there is a strong expectation its covered bonds will be fully redeemed on time. However, further mark to market pressure is likely. With Portugal on review for an upgrade, the covered bonds of Santander Totta and CGD present value.

German bankers, who have been busy nursing their sore heads after celebrating their country’s World Cup victory on Sunday night, will not have been overly burdened by DG Hypothekenbank’s drive-by Pfandbrief syndication on Monday. Being the rarest issuer from one of the most technically squeezed jurisdictions in Europe, a strong outcome was never in doubt. Painkillers may however be required for the allocation process.

The European Securities and Markets Authority (ESMA), has published a 110 page consultation paper that, among a number of topics, sets out the key factors that determine whether a covered bond swap should be excluded from central clearing. ESMA’s proposals mirror those set out by the European Banking Authority in April.

Bankers expect more bad news to come out of Portugal and the correction being seen in peripheral covered bonds may therefore have further to go. But this bad news fundamentally does not change the positive longer term picture for the rest of peripheral Europe. A technical retracement had been long overdue and will provide a rare buying opportunity for real money investors and banks looking to cover their shorts.

Three issuers launched covered bonds this week with varying results, which suggested that the converging trend between core and peripheral Europe has stalled. Banca Monte dei Paschi di Siena (MPS) struggled to attract anything like the demand seen in its previous covered bond as Portuguese woes outweighed the programme’s rating upgrade into investment grade territory.