Covered Bonds

Despite a UK holiday syndicate bankers are not ruling out deals on Monday, and there are still borrowers eager to execute bonds in run up to summer, they said.

The European Banking Authority’s (EBA) public consultation on reporting for asset encumbrance, which took place on Thursday this week, proved a lively debate with bankers submitting several topics that need to be considered

The relentless push down the credit curve in search of yield reached a new milestone in the FIG sector this week, when Baa3-rated Caixabank became the first Spanish issuer that is not a national champion to tap the senior unsecured market for five year funding in well over a year.

Turkey’s Denizbank is expected to price an SME covered bond within a month and there are hopes other issuers will follow. While the SME product is unlikely to be seen as anything other than niche, there are strong expectations that up to four borrowers will launch euro denominated mortgage backed deals in a liquid benchmark size this year.

Rarity and top quality collateral helped Sweden’s Länsförsäkringar Hypotek (LF Hypo) on Monday build a chunky orderbook for a €500m covered bond, which marked its return to the euro market after almost two years.

Münchener Hypothekenbank tapped a recent three year sterling floater for another £100m on Tuesday, taking advantage of a market window before holidays and programme updates prevented issuance.

Australia and New Zealand Banking Group opened books on its first euro benchmark covered bond in over a year on Thursday, undaunted by the European Central Bank’s upcoming rates decision due later the same day.

Turkey’s Denizbank is expected to price its SME covered bond within the month and there are hopes other issuers will follow. While the SME product is unlikely to be seen as anything other than niche, there are strong expectations that at least four borrowers will launch euro denominated mortgage backed deals in benchmark size.

Australia and New Zealand Banking Group slipped in a successful euro benchmark covered bond on Thursday morning ahead of the European Central Bank’s rates decision. The borrower returned to euros for the first time in over a year and closed the tightest covered bond yet from an Australian issuer.

Denizbank is a step closer to making its covered bond debut after receiving a A3 rating from Moody’s this week.

The secondary covered bond market is grinding tighter and a rates cut from the European Central Bank will only underline the bid, said covered bond traders on Wednesday. And with the short end likely to outperform, a curve steepening may well follow.

Bankinter’s latest €500m tap this week came with a tighter spread and drew more international accounts than the borrower has managed with any benchmark deal in recent years. As its issuance costs drop its loan portfolio is becoming profitable, and though it remains barred from the senior unsecured market, comfortable covered bond funding costs and foreign demand are steps in the right direction, a funding official told The Cover.