Covered Bonds

The Bank of international Settlements has suggested that local regulators may seek to limit the level of balance sheet encumbrance by linking it to the level of capital that a bank needs to hold.

Belfius Bank on Tuesday followed the footsteps of KBC bank, mandating and launching a seven year mortgage backed covered bond with pricing being closer to its Belgian peer than any previous funding. Deutsche Pfandbriefbank also reopened its March 2020 for an attractively priced €250m tap.

Holidays in Germany and the UK next week shrink the issuance window but covered bond bankers still expect benchmark deals. A seven year tenor makes for simple execution, but Deutsche Pfandbriefbank’s (Pbb) 15 year bond has captured issuers’ imaginations, said syndicate officials.

Deutsche Pfandbriefbank (Pbb) returned to the public sector Pfandbrief market in style this week. It extended the German covered bond curve with an impressive 15 year deal and plans to issue at least one public sector backed bond a year, it told The Cover.

Deutsche Pfandbriefbank launched the longest German Pfandbrief in a decade this week, pricing a €500m 15 year deal. Its success in an unusual tenor illustrates just how flexible investors have become, said syndicate officials. But bankers are divided over the potential for more ultra-long dated covered bonds.

Belgium’s KBC Bank returned to the covered bond market for the second time this year to pull in €1bn of funding on Tuesday at pricing so tight that one of the leads called it "screamingly good".

Rare issuer WL Bank priced a €500m seven year Pfandbrief almost flat to mid-swaps on Thursday, to the surprise of some syndicate bankers on the deal.

Dollar benchmark covered bond issuance for 2013 rose by over 40% in the last week to $13.5bn as three issuers collectively raised $4bn, drawing $5.2bn of interest over 150 orders.

Speaking to The Cover on Thursday, SEB’s head of treasury management John Wang emphasised the granularity of the book for the bank’s inaugural dollar trade that was launched on Tuesday.

WL Bank priced a €500m seven year Pfandbrief almost flat to mid-swaps on Thursday, to the surprise of some syndicate bankers on the deal.

Westpac became the third issuer in less than a week, and the 10th this year, to tap the US dollar covered bond market. After mandating joint leads for a $1.25bn transaction on Wednesday the deal was priced at the tight end of guidance at 35bp over mid-swaps, which was the tightest five year print in dollars so far this year.

The fuss over covered bond issuance and the impact of asset encumbrance on the senior unsecured claim is nothing more than a warm-up act for the main show — the fading away of senior unsecured bank debt due to depositor preference.