Covered Bonds

Transparency will be the key to luring investors into Basel III-compliant Indian bank debt. Now that the buyside is on heightened alert, sweeping risky components under the carpet will only backfire on issuers.

Credito Emiliano attracted a great reception for its first covered bond in two years. The deal’s success, in marked difference to last week’s less than stellar slew of primary deals, reflected the attractive premium, the issuer’s marketing efforts and, most importantly, stable market conditions.

Russia’s DeltaCredit Bank has opened books on a Rb5bn ($151m) five year covered bond and is aiming to close the deal by Friday, said bankers on the deal.

Several issuers could launch deals this week but after recent sovereign bond market volatility and a lacklustre reception to last week’s deals, the reopening trade will need to be from the right name at the right spread, said bankers.

The EU Council’s decision to explicitly exclude covered bonds, as well as the underlying hedging arrangements, from bail-in regimes, is credit positive for the covered bond market, Moody’s said on Monday.

Münchener Hypothekenbank opened books with guidance on its €500m July 2028 at 15bp-17bp over mid-swaps on Thursday through BNP Paribas, BayernLB, DZ Bank, LBBW, Nord/LB and WGZ Bank.

Caisse de Refinancement de l’Habitat returned to the market on Thursday for the first time since March, with a fairly priced re-opening of its €1bn January 2025 through joint leads BNP Paribas, LBBW, Natixis and Société Générale.

After over a week of no activity, the primary covered bond market sprang back to life on Thursday as a recovery in the rates market persuaded bankers and their clients that deals could be successfully executed.

Caisse Française de Financement Local (Caffil)is lining up its first public-sector covered bond issue and plans to raise at least €2bn this year, according to marketing documents seen by EuroWeek. Meanwhile, La Banque Postale, also owned by the French state, has mandated joint leads for a roadshow that may lead to a covered bond.

In the midst of one of the most volatile weeks of the last five years, The Cover pinned down Kristion Mierau, a portfolio manager at Pimco in Munich, and asked him about the outlook for the global economy, rates and the risks for covered bonds.

Münchener Hypothekenbank opened books with guidance on its €500m July 2028 at 15bp-17bp over mid-swaps on Thursday through BNP Paribas, BayernLB, DZ Bank, LBBW, Nord/LB and WGZ Bank. The fact that the deal was priced at the wide end of guidance, relied on lead orders and was barely sold outside Germany suggested a lacklustre reception.

EU leaders finally reached an agreement on bail-in rules on Thursday, laying the ground for a pan-European framework for forcing losses on to the shareholders and creditors of failed or failing banks. However, the accord gives national regulators wide discretion over how to apply these losses, making it difficult to judge the risks of investing in senior unsecured bank paper. Though covered bonds are excluded from bail-in they are not immune.