Covered Bonds
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Jozef Prokes, a portfolio manager within the European fixed income team at BlackRock (AuM: €24bn), speaks to The Cover in a podcast interview about the aims of the European Central Bank’s (ECB) third covered bond purchase programme (CBPP3). Prokes addresses a range of topics including the risks investors face with the globalisation of covered bonds, pass-through structures, SME covered bonds and how his firm is coping with low interest rates.
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The Brazilian Finance Ministry expects to publish its draft covered bond law this week and, by using a presidential order, the legislation could be effective soon, Matheus Cavallari, deputy secretary for microeconomic policy at the ministry told The Cover. He said two large issuers had already sought regulatory approval to issue covered bonds.
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Commerzbank opened books for a €1bn five year mortgage Pfandbrief on Monday, and was set to issue in line with the spread achieved by Compagnie de Financement Foncier (CFF), which issued a deal of the same tenor two weeks ago. The pricing shows that there is no longer a spread between French and German covered bonds.
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TD priced a $1.75bn 144A private placement covered bond on Thursday at the same spread as Bank of Nova Scotia, which issued a $1.5bn SEC-registered deal two weeks ago. The deal should have priced wider but thanks to demand from Europe, it got great price tension.
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Covered bonds backed by environmental and social governance (ESG) mortgage loans are expected to become an important component of the booming socially responsible investment market following a ground-breaking Pfandbrief issued this week by Münchener Hypothekenbank (Muhyp). But bringing trades to market will not be without its challenges.
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Münchener Hypothekenbank’s €300m ESG Pfandbrief will be remembered as one of the most important milestones in the development of the socially responsible investment (SRI) bond market.
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The Targeted Long Term Refinancing Operation conducted on Thursday by the European Central Bank is not targeted and will do little to improve the expansion of European credit.
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The ECB will refrain from aggressive purchasing during the third covered purchase programme (CBPP3). Ulrich Bindseil, director general of market operations at the European Central Bank, the lead architect of the programme, told The Cover in an exclusive interview that he expects CBPP3 to lead to tighter spreads which will encourage more issuance. -
Sparkasse KoelnBonn and Commerzbank joined the covered bond new issue pipeline on Friday, taking the list to five.
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Covered bonds backed by environmental and social governance (ESG) mortgage loans are expected to become an important component of the booming socially responsible investment market following a ground-breaking Pfandbrief issued this week by Münchener Hypothekenbank (Muhyp). But bringing trades to market will not be without its challenges, writes Bill Thornhill.
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Royal Bank of Canada and Toronto Dominion returned to the dollar covered bond market this week, taking the number of benchmark issues in the currency this month to four. The two $1.75bn triple-A five year deals priced at 27bp and 29bp over mid-swaps, respectively. While the two deals became joint largest dollar deals this year, it was RBC’s deal was the tightest in dollars for several years.
