Covered Bonds

Banco Santander Chile is expecting to issue the first ever covered bond from the Andean country in July, aiming to create a liquid market that can support one of the most developed mortgage markets — estimated at around $45bn — in emerging economies.

Sparebank 1 Boligkreditt opened books for a €1bn seven year covered bond backed by Norwegian residential mortgages on Tuesday.

Deutsche Hypothekenbank (Deutsche Hypo) 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 that has caused fixed income volatility.

Covered bonds backed by loans to small and medium-sized enterprises (SMEs) are gaining traction as a funding tool for European banks and could soon become a feature in Italy, Spain and France, according to Moody’s.

Covered bond deals stormed back to centre stage this week, as issuers faced up to the likelihood of continued market volatility and decided to fund while levels remain historically tight. With covered bonds coming under increasing pressure in the secondary market, a clutch of names reached the conclusion that it made sense to come sooner rather than later, writes Bill Thornhill.

Scotiabank filed for SEC registration this week, increasing the likelihood of other issuers filing programmes with the SEC, a US lawyer told The Cover on Thursday.

Covered bonds backed by loans to small and medium-sized enterprises (SMEs) are gaining traction as a funding tool for European banks and could soon become a feature in Italy, Spain and France, according to Moody’s.

Cover pool encumbrance was steady last year versus the previous year, Fitch said on Thursday. The most stable levels were among the most encumbered institutions, where covered bonds have made up a large share of their financing for a long time.

Denizbank launched the first tranche of its SME-backed covered bond on Thursday, and placed the bonds with three supranational agencies.

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.