Covered Bonds

UniCredit priced the tightest covered bond since the start of the crisis on Wednesday, achieving the lowest coupon for an Italian covered bond. Waleed El Amir, the bank’s head of long term funding, group finance, spoke to The Cover about the deal.

Covered bond issuers have finally woken up to the realisation that conditions are not going to get any better for them any time soon. Rather than hold out for yet another basis point, some have decided to pile into the market. There is a risk of overcrowding, but that’s probably better than the alternative — leaving it too late.

Raiffeisen-Landesbank Steiermark built a solidly oversubscribed book for only the second 15-year covered bond of the year, enabling leads to price inside guidance in what they said was still an issuers’ market, despite the more volatile macroeconomic backdrop.

Denizbank is planning to launch the first tranche of its SME-backed covered bond on Thursday, and will place the bonds with three supranational agencies.

Santander Chile is set to issue Chile’s first domestic covered bond this month. It will be triple-A rated and have a 15 year maturity. Meanwhile in Canada, Bank of Nova Scotia is lining up an SEC registered deal, the first off the country’s new legal framework.

Austria’s Raiffeisen-Landesbank Steiermark has mandated leads for its debut mortgage-backed covered bond, a no grow €500m issue that could be launched as early as Wednesday. However, it has yet to decide on maturity, perhaps waiting to see how well other deals are received before making a final call.

Sparebank 1 Boligkreditt opened books for a seven-year €1 billion covered bond backed by prime Norwegian residential mortgages on Tuesday. The deal attracted a granular, but not hugely oversubscribed book, after pricing with a small new issue premium in a busy market.

The new issue covered bond market gathered momentum on Tuesday with two fresh deals, including one from UniCredit which should substantially cut its cost of funding.

Despite the start of a new quarter, investors are not pushing money into covered bonds, secondary market dealers told The Cover on Monday. Bunds have weakened in line with US Treasuries but the rise in yields has not tempted insurance companies to buy bonds. They are waiting for key US employment data due on Friday, which could trigger a further yield hike, before making any move, said bankers.

Medium-sized banks in Italy and Austria could be next in line to sign up to the European Covered Bond Label, an initiative that has been dominated in its first six months by larger issuers, the European Covered Bond Council told The Cover on Monday.

Deutsche Hypothekenbank took advantage of a ratings lift from Moody’s to launch a €500m seven year mortgage Pfandbrief into a quiet primary market on Monday, despite the uncertain macro-economic backdrop which has caused fixed income volatility.

The Dutch arm of BNP Paribas Personal Finance will begin a roadshow next week for its second ever publicly sold RMBS.