Covered Bonds

Norddeutsche Landesbank Girozentrale has mandated joint leads to organise a roadshow for its second aircraft Pfandbrief and said a new deal is expected to follow.

Despite renewed emerging market volatility and, to a lesser extent, European peripheral sovereign weakness, the covered bond market was steady on Monday. Secondary market volumes have collapsed, but bankers were encouraged by the market’s stoic response to wider credit woes.

Turkey’s updated covered bond law is credit positive, Moody’s said on Monday, after the country’s Capital Market Board announced the changes last week. However, the timetable for the first Turkish euro denominated mortgage backed benchmark has been pushed back after the lira hit new lows.

Stephan Dorner is joining the credit research team at Crédit Agricole CIB in London as a covered bond analyst.

The rally in Bunds and swaps caused covered bond bankers further concern on Friday. Profit taking still dominates secondary flows, and with already heavy dealer inventories building further, the environment will not rekindle primary flow. Yet, covered bonds regularly face such corrections and in the long run yields will move higher, buyers will return and the covered market’s constructive technical backdrop will come back into play.

Pacific Investment Management Co and Source UK Services, an exchange-traded products provider, have put their expertise together to offer the first active exchange traded fund that invests purely in covered bonds.

Pacific Investment Management Co and Source UK Services, an exchange-traded products provider, have put their expertise together to offer the first active exchange traded fund that invests purely in covered bonds.

BPCE won plaudits from investors and bankers for the pricing on its €1.5bn six year covered bond which offered an unusually attractive new issue premium. In contrast to all other French issuance this year, it has performed well since becoming free to trade.

Belfius Bank on Tuesday launched a tightly priced five year covered bond that was easily digested, thanks to its relatively small size. Meanwhile, Kommunalkredit Austria and Commerzbank named leads for deals to be launched following respective roadshows.

Banca Carige’s covered bonds widened sharply in the secondary market on Thursday amid continued weakness among recent issues, and some selling of second tier peripheral credits.

Commerzbank hit the road this week to update investors about changes to its SME covered bond programme. However, a second SME deal off the programme will have to wait until it emerges from blackout, lead banks said.

Fitch has set out how its ratings of covered bonds will be constrained by the credit quality of sovereign risk. Its criteria exposure draft gives specifics on how the agency embeds sovereign default risk in its ratings stresses.