Covered Bonds

Deutsche Pfandbriefbank launched the longest German Pfandbrief in nine years on Wednesday, pricing a €500m 15 year deal. The potential for more ultra-long dated deals is limited, but Pbb’s success in an unusual tenor illustrates just how flexible desperate investors have become, said bankers.

Skandinaviska Enskilda Banken successfully issued its maiden dollar denominated covered bond on Tuesday, attracting a comfortably oversubscribed and granular book at a funding level that was close to what it could have achieved in the local market. Westpac has mandated leads for a follow on 144A dollar benchmark.

Rare issuer WL Bank has picked banks to manage its latest Pfandbrief and is aiming to launch a seven year euro denominated bond as early as Thursday, said bankers.

Belgium’s KBC Bank returned to the covered bond market for the second time this year to pull in €1bn of seven year funding at pricing so tight that one of the leads called it “screamingly good”. Despite pricing on top of its interpolated curve and through the Belgian government, the deal attracted strong demand from a broad range of investors.

Fitch has upgraded a series of Greek covered bonds, following the sovereign upgrade of the Hellenic Republic and of Greek banks. Meanwhile, Standard & Poor’s said covered bonds had recently shown rating stability despite the fragile environment.

Santander UK has announced a new deal from its Holmes master issuer RMBS shelf. The prospective deal is likely to offer a significant spread pick up compared to UK covered bonds. And Rabobank has privately placed RMBS issuance from its Obvion subsidiary.

A sharp increase in primary supply is unlikely to appear and save the covered bond market from a dire lack of secondary liquidity, but there are other solutions, bankers told The Cover on Monday. The European Central Bank holds more than €60bn in covered bonds and releasing some of these into the secondary market would ease the pain, they said.

The covered bond market is open for almost any issuer and though its unlikely that activity will pick up quickly, there are a number of potential transactions expected in the coming weeks, bankers told The Cover on Monday.

FIG issuers were cooling off on Monday as public holidays across Europe kept syndicates and investors alike away from their desks. But they will be keen to return with the market in fine shape and a clutch of issuers on the road.

Sweden’s Stadshypotek took the year’s total for dollar covered bond issuance past $10bn this week with a $1.25bn five year deal. Nordic issuers’ spreads are closing in on those of their Canadian peers and dollar covered bonds from many countries have become expensive compared to Treasuries, said Barclays analysts.

The subject of SME-backed covered bonds continues to provoke a sharp division of opinion within the industry. And it was a lively topic at the annual covered bond investor conference, held on Thursday in Frankfurt.

Regulatory uncertainty about the potential bailing-in of bank debt could strengthen the ABS market, as securitised assets are off balance sheet, covered bond investors said this week at a conference in Frankfurt.