Covered Bonds

Hard work rather than a change in terminology led to the surge in interest for Nykredit Realkredit’s latest senior secured deal, an official at the issuer told The Cover on Tuesday. Almost 140 accounts produced its biggest order book yet for a senior secured deal.

Sparkasse KölnBonn is set to announce a deal in the belly of the curve, somewhere in the region of five years, bankers told The Cover on Monday. Other issuers, possibly from Europe’s periphery, are also considering deals, said bankers, after further strong performance in the secondary market.

Nykredit Realkredit launched a euro benchmark junior covered bond on Monday after marketing the deal as a senior secured transaction. This approach helped draw traditional covered bond buyers and credit accounts into the deal, which was priced at half the spread and with twice the orders that its last outing in the rare asset class achieved.

Eirikur Jensson, head of funding at Arion Bank in Iceland, formally Kaupthing Bank, talked to The Cover about the bank’s restructuring. In the context of regulations that oblige the bailing in of senior unsecured investors, potentially within the next three years, its case history argues strongly in favour of the covered bond asset class, irrespective of whether there is a legal framework or not.

Covered bond issuers decided against bringing benchmark bonds on Friday despite a better backdrop, but there are several potential deals in the pipeline and stronger sentiment should encourage issuers looking to come next week, said bankers.

Akbank is poised to beat domestic rival Garanti Bank to the punch with the first euro covered bond backed by Turkish residential mortgage assets, writes Bill Thornhill.

Austria’s Vorarlberger Landes-und Hypothekenbank (Vorarlberger Hypo) made its mortgage Pfandbrief debut on Tuesday, selling a tightly priced seven year bond and taking supply in that maturity to over €4bn in only a week.

HypoVereinsbank (HVB) closed a €500m seven year mortgage Pfandbrief on Monday after opting for a more generous starting point than those on recent German deals. It was rewarded with a far larger orderbook, which allowed it to price the bond well inside initial price thoughts.

Nykredit announced a benchmark junior covered bond mandate on Wednesday, just a day after Standard & Poor’s warned that Danish covered bond ratings could become increasingly reliant on the junior asset class.

Crédit Mutuel CIC became the first French issuer to tap the sterling covered bond market for more than five years on Monday as it and Münchener Hypothekenbank joined the growing list of foreign banks that have tapped the blossoming sector.

Moody’s downgraded French mortgage guarantor Crédit Logement from Aa2 to Aa3 this week. RBS analysts said that a further downgrade to the single-A range would mean only 80% of the value of the mortgage loan collateral it guarantees could be used to calculate its overcollateralisation ratio.

Crédit Mutuel CIC sold its first covered bond of 2013 and its first euro benchmark in over a year on Monday, launching a €1.25bn seven year transaction flat to its own curve.