Covered Bonds

Covered bonds from Denmark and Luxembourg, as well as some from the Netherlands, could lose the Covered Bond Label, when it becomes aligned with the Capital Requirements Regulation from the start of next year, bank analysts have warned.

BBVA’s radical decision to index the mortgage cover pool backing its covered bond programme to the current value of house prices sets a new transparency benchmark in Spain. But it also underlines the indefensible regulatory bias in favour of covered bonds and against securitization, a far more transparent product.

Canadian Imperial Bank of Commerce (CIBC) became the second Canadian issuer to price a legally compliant covered bond in Australian dollars. The A$500m floating rate long three year deal, which could have been increased, provided competitive funding and solid investor diversification.

Nearly four months after its roadshow, New Zealand’s ASB Bank finally took the plunge and opened books for a €500m five year covered bond on Thursday. Despite a high rating and fair spread, the deal found only a tepid investor response as it competed head-to-head with Banca Carige. At the same time, Canadian Imperial Bank of Commerce opened books for a long three year denominated in Aussie dollars.

Primary market covered bond activity took off on Thursday after the US Congress voted to extend its debt ceiling deadline to February 7 next year. Four issuers — from Italy, Hungary, New Zealand and Canada — opened books for new benchmarks. The star turn came from Italy’s Banca Carige which, despite strong headwinds, attracted a resounding endorsement from investors for its first deal since March 2011.

OTP Mortgage Bank opened books on a €500m floating rate covered bond on Thursday morning, and set guidance on the mortgage backed deal at 190bp over three month Euribor.

After being absent from the market for nearly three years, HSBC returned for the second time this year to issue a seven year covered bond which, like its earlier 10 year deal, was notable for its breadth and depth of demand.

OTP Mortgage Bank opened books on a €500m floating rate covered bond on Thursday morning, and set guidance on the mortgage backed deal at 190bp over three month Euribor.

Covered bond primary activity took off on Thursday after the US government voted to extend the debt ceiling deadline to February 7 next year. As many as four issuers from Italy, Hungary, New Zealand and Canada opened books for new benchmarks. But the star turn was Italy’s Banca Carige which, despite strong headwinds, attracted a resounding endorsement from investors for its first deal since March 2011.

After roadshowing nearly four months ago, New Zealand’s ASB Bank finally took the plunge and opened books for a €500m five year deal on Thursday. Despite a high rating and fair spread, the deal competed head on with Banca Carige (see other story) and found only a tepid investor response. At the same time, Canadian Imperial Bank of Commerce opened books for a long three year denominated in Aussie dollars.

The looming US debt ceiling deadline is weighing more and more on market participants’ minds, but you would not know it from the state of the FIG markets. The euro market is busy in senior unsecured, covered bonds and tier two — and BPCE even managed to get a subordinated dollar bond done on Tuesday.

HSBC has returned to the covered bond market for the second time this year with a seven year deal which, like its earlier transaction, was notable for its breadth and depth of demand.