Covered Bonds

Covered bonds are now a widely recognised global product but, in the face of bank deleveraging, the market has seen an unprecedented contraction. EuroWeek's Bill Thornhill spoke to Christian Reusch, global head of IG corporate origination and debt syndicate at UniCredit in Munich, about the outlook for supply, spreads, the impact of bank resolution regimes and prospects for pass-through structures — as well as the importance of reviving the ABS market.

Italy’s Intesa Sanpaolo made a surprise return to the covered bond market on Thursday, launching a €750m five year deal. It has a penchant for bringing deals during the annual Euromoney Covered Bond Congress, having done the same last year. Despite the odd timing and a spread that eventually moved into double digit territory, the deal was priced at the tight end of the range.

The definition of liquidity depends on what role you play in the market, panellists told the European Covered Bound Council’s plenary session in Barcelona. Ultimately regulators hold the key to its definition and this remains an open book.

Covered bonds should be liable for bail-in, the Euromoney/ECBC Covered Bond Congress in Barcelona heard on Thursday. Diego Valiante, head of research at the Centre for European Policy Studies, made the controversial claim as panellists discussed the role of covered bonds in the new banking order.

Covered bonds should be liable for bail-in, the Euromoney/ECBC Covered Bond Congress in Barcelona heard on Thursday. Diego Valiante, head of research at the Centre for European Policy Studies, made the controversial claim as panellists discussed the role of covered bonds in the new banking order.

The definition of liquidity depends on what role you play in the market, panellists told the European Covered Bound Council’s plenary session in Barcelona. Ultimately regulators hold the key to its definition and this remains an open book.

Italy’s Intesa Sanpaolo made a surprise return to the covered bond market on Thursday, launching a €750m five year deal. It has a penchant for bringing deals during the annual Euromoney Covered Bond Congress, having done the same last year. Despite the odd timing and a spread that eventually moved into double digit territory, the deal looks set to price at the tight end of range.

Palau de Congressos de Catalunya, Barcelona

After Intesa Sanpaolo Vita — the Italian lender’s life insurance unit — hit the subordinated debt market on Tuesday, Credit Suisse followed suit with a euro-denominated Coco on Wednesday. Crédit Agricole’s Coco was delayed by a last minute documentation change, but the FIG markets are on a roll, with SEB and Macquarie bringing senior trades.

Conditional pass-through bonds gained buyside support on Wednesday when a leading covered bond investor said they could help small, rating-constrained banks from Europe’s periphery. Henrik Stille of Nordea Investment Management was speaking at a panel at the ECBC plenary session in Barcelona. Vulnerable issuers could use the conditional pass-through structure to shore up covered bond programme ratings as the rating agencies are not going to move quickly on positive developments for covered bonds in the Bank Recovery and Resolution Directive.

Multi-Cédulas are enjoying some investor support, and RBS says they offer good relative value. However many of these Spanish multi issuer programmes face being downgraded to junk and are lagging the country’s government bond rally. Downgrades would spark forced selling, which the existing investor universe would not be big enough to absorb, Crédit Agricole has warned.

EUROWEEK: Asset encumbrance has been grabbing the headlines or a while now but I’m not sure it’s such a negative factor from a covered bond investors’ perspective is it?