Covered Bonds

NIBC Bank is planning to launch a second deal off its conditional pass through programme (CPTP) after mandating leads for a roadshow. The issuer’s outstanding deal has performed, but only after a fairly long period of time had elapsed, said bankers.

Despite some technical shortcomings, German Pfandbriefe comply with the transparency requirements of the Capital Requirement Regulation (CRR), according to Commerzbank research. Investors in some regimes such as the UK and the Netherlands, can now halve the capital change they apply to Pfandbriefe, it said.

Länsförsäkringar Hypotek (LF Hyp) issued Sweden’s first covered bond deal of the year on Tuesday, after Finland’s OP Mortgage Bank attracted excess demand for its deal on Monday. The Swedish bank’s euro funding was notable for being cheaper than that achievable in its home market.

The heyday of the Spanish Cédulas market may be long gone with the product presenting something of a rare commodity in the primary market these days, especially at the long end of the curve. But this week investors got their chance to buy when CaixaBank issued Spain’s second only covered bond of the year and the second only 10 year in two years, even though the issuer admitted it did not need the funding.

Westpac this week issued its first euro denominated covered bond deal of the year and the second from an Australian issuer. The deal was only modestly oversubscribed as bank treasuries weren't interested because the bond is ineligible for liquidity buffers and repo with the European Central Bank.

Bail-in rules that affect covered bonds are set to be tightened up to give investors more explicit protection in the event of a bank resolution, a banker told GlobalCapital on Thursday.

Moody’s upgrade of Irish covered bonds will expand the universe of demand. The rating action should underpin the Irish ACS market’s recent outperformance, that has been led by the Bank of Ireland’s recent five year. However, despite the real estate market stabilising, two Irish banks were downgraded due to persistent asset quality challenges.

Bank of Ireland returned to the covered bond market on Tuesday to issue its fifth deal since November 2012, when it returned after the Irish sovereign debt crisis. The transaction was well oversubscribed with plenty of orders, but less spectacularly so than on previous issues.

Fitch’s covered bond rating methodology, which was altered this week, may be construed as too harsh. Fitch favours systemically important banks, but Crédit Agricole notes that this is to the exclusion of smaller banks that issue covered bonds which have also benefitted from public support. Fitch favours six countries that issue a lot of covered bonds, but the analysts argue this number is too low.

Moody’s has become the second of the big rating agencies to overhaul its covered bond rating schema. It has given 15 European programmes a one notch upgrade, while nine are on review for upgrade and three downgrade reviews have been scrapped.

Bail-in rules that affect covered bonds are set to be tightened up to give investors more explicit protection in the event of a bank resolution, a banker told The Cover on Thursday. The new draft of the rules makes it clear that EU member states must ensure the banks have enough assets to ensure full and timely payment, even if this is above the minimum stipulated under national law.

Westpac has issued its first euro denominated covered bond deal of the year and the second from an Australian issuer. The transaction was modestly oversubscribed as bank treasuries were absent due to the fact the bond is ineligible for bank liquidity buffers and for being repo’d with the European Central Bank.