Covered Bonds

National Bank of Canada got a €1bn five year covered bond safely away on Tuesday, its first deal under the new Canadian covered bond law, after paying a healthy new issue premium to counter falling liquidity.

National Bank of Canada is still deciding when to launch a covered bond in euros, with bankers insisting there is enough liquidity for deals this week, though they conceded that very few issuers are under any pressure to pull the trigger.

The European Covered Bond Council wants covered bonds to be treated as highly liquid assets under Basel III’s Liquidity Coverage Ratio, backing up earlier findings from a European Banking Authority study. The ECBC wants policymakers to consider its Covered Bond Label Convention as an alternative gauge of liquidity, instead of a covered bond’s rating.

UniCredit Bank Czech Republic and Slovakia has issued the first benchmark-sized euro covered bond backed by Czech mortgages. The €800m five year hypoteční zástavní listy transaction was preplaced in the local market with a diversified group of investors.

ING Belgium made a successful covered bond debut on Tuesday, attracting a heavily oversubscribed order book from a wide range of investors for its €1bn five year trade.

Tight spreads for outstanding Pfandbriefe from top tier issuers meant the book build for Landesbank Hessen-Thueringen’s (Helaba) €750m four year bond was slow on Tuesday, even after it offered a discount to secondary levels.

Spain is set to follow Turkey and become the second country with a legal framework for issuing bonds backed by SME loans, according to BBVA CIB research.

Average spreads for Danish covered bond auctions, which finished on Wednesday, hit record lows, Danske Bank research said on Thursday. The auctions were heavily influenced by the government’s amended proposal to extend the maturity of bonds from next year.

Co-operative Bank has asked holders of its £600m Moorland covered bonds due November 2021 to vote on an extraordinary resolution.

The bank capital market is ablaze this week, with Barclays’ additional tier one deal on Tuesday being followed by a low trigger tier one trade from Credit Suisse and a rights issue and preference share sale for Bank of Ireland on Wednesday. Covered bonds and ABS have continued apace, but like senior unsecured, those markets are slowing down as Christmas approaches.

Investors have not turned in for Christmas quite yet, but bankers expect few issuers will to try to pre-fund over the rest of December. The success of ING Belgium’s €1bn five year on Tuesday could, however, entice one more Belgian issuer to market before year-end.

ING Belgium made a successful covered bond debut on Tuesday, attracting a heavily oversubscribed order book for the €1bn five year trade.