Covered Bonds

House prices across Europe continue to fluctuate but they could stabilise soon, according to Standard & Poor’s. The picture varies widely, with Spanish and Italian prices set to fall again, but German prices likely to rise further, while Irish prices look to have stabilised.

SEB returned to the covered bond market on Monday to issue its second seven year euro benchmark of the year and the second from a Swedish bank in less than a week. Though SEB was unable to match the cheap funding in Stadshypotek’s recent deal, it was placed with more real money investors.

Norddeutsche Landesbank priced its second dollar covered bond benchmark this week, attracting a multiple oversubscription from a diversified range of high quality global investors. Though expensive, the funding showed the borrower’s commitment to building its US curve and establishing solid name recognition which will help it efficiently match-fund its dollar assets.

Two core covered bond issuers are looking to bring deals, but with European holidays on Friday, the funding exercises will be postponed until next week. In the secondary market, bankers reported clients extending duration in the core, switching from core to periphery, as well as adding to peripheral risk.

Banks continue to favour senior unsecured over covered bonds, but spreads will soon start to reflect the fundamentally weak claim of senior bondholders, RBS said on Wednesday, particularly for Spanish deals.

Norddeutsche Landesbank priced its second US dollar covered bond benchmark this week, attracting a multiple oversubscription from a diversified range of high quality global investors. Though expensive, the funding showed the borrower’s commitment to building its US curve and establishing solid name recognition which will help it efficiently match-fund its dollar assets.

Covered bonds from Australia and New Zealand have varying levels of exposure to the property cycle, according to latest Moody’s research. Even if prices were to fall, there are safeguards to moderate the impact, it said.

The European Banking Authority will allow banks to use covered bonds as freely as sovereign bonds, but it has damned ABS as the least liquid asset class of all. But, had the EBA looked at senior plain vanilla securitisations over the last three years instead of five, it would have found ABS more liquid than covered bonds.

Norddeutsche Landesbank is set to open books for a US dollar denominated benchmark, having mandated leads for a roadshow two weeks ago. Meanwhile, Berlin Hypothekenbank on Tuesday successfully placed a €125m tap of its five year deal at deeply sub-Euribor levels, highlighting the funding disparity for German issuers in dollars compared to euros.

SEB returned to the covered bond market on Monday to issue its second seven year euro benchmark of the year and the second from a Swedish bank in less than a week. Though SEB was unable to match the cheap funding in Stadshypotek’s recent deal, it was placed with more real money investors.

The credit quality of Pfandbriefe is not under threat from the recent rise in German apartment prices, Moody’s said on Monday.

Many Pfandbrief issuers have been happy to keep their traditional investor base of German insurance companies content largely through creating tailor-made private placements. But one issuer is shaking things up.