Covered Bonds

Julia Hoggett is leaving Bank of America Merrill Lynch to join the Financial Conduct Authority (FCA), to run the investment banking supervision division, starting in early May. Her departure follows a string of high profile exits from the firm.

This week’s sweep of covered bond primary deals have all performed well in the secondary market, and on Wednesday, bankers assessed the syndications. Although conditions remained buoyant, bankers said they did not expect any more deals this week.

Singapore

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. It was well oversubscribed with plenty of orders, but less spectacularly so than on previous issues.

Spain’s CaixaBank took advantage of strong market conditions on Tuesday to issue the country’s second covered bond of the year. The funding took advantage of scarcity at the long end of the Spanish market, and concerns that the other Spanish national champions are more exposed to emerging market risks.

Länsförsäkringar Hypotek (LF Hyp) issued Sweden’s first covered bond deal of the year on Tuesday, having identified solid excess demand in Monday’s deal from Finland’s OP Mortgage Bank. The euro funding was cheaper than what the borrower could have achieved in Swedish kronor.

Fitch is the first of the three major rating agencies to announce changes to its covered bond rating schema and has amended its covered bond rating criteria, taking into account the positive effect of bank resolution regulation.

Finland’s OP Mortgage Bank returned to the covered bond market on Monday to issue a €1bn seven year benchmark. It paid a relatively small new issue premium, reflecting its long scarcity value, the high quality of its deal, and the deal size.

Spanish banks will be able to issue structured covered bonds under planned changes to corporate finance law, Moody’s said on Monday. The law change would enable issuers to structure dual recourse instruments with conditional pass through mechanisms backed by a wide range of assets issued from special funds.

Covered bond investors switched from short into longer dated covered bonds on Monday, secondary market dealers reported, while second tier peripheral bonds continued to attract interest. However, there was better profit taking in multi-Cédulas, which offer a modest spread over government bonds.

The covered bond investor council (CBIC) said on Friday that it supports the case for the inclusion of covered bonds as assets of extremely high quality within Basel III’s liquidity coverage ratio (LCR). The European Commission will host a public hearing on Monday on the LCR where it will consider the European Banking Authority’s analysis and recommendation.

Eika Boligkreditt opened books on Wednesday for a €500m seven year covered bond that offered a spread not seen from Norway since January 2013, and one of the largest pick-ups from a core European issuer this year. But with a new issue premium of just 2bp, the funding was cheap for the borrower.