Covered Bonds

Denizbank is planning to launch the first tranche of its SME-backed covered bond on Thursday, and will place the bonds with three supranational agencies.

Santander Chile is set to issue Chile’s first domestic covered bond this month. It will be triple-A rated and have a 15 year maturity. Meanwhile in Canada, Bank of Nova Scotia is lining up an SEC registered deal, the first off the country’s new legal framework.

Austria’s Raiffeisen-Landesbank Steiermark has mandated leads for its debut mortgage-backed covered bond, a no grow €500m issue that could be launched as early as Wednesday. However, it has yet to decide on maturity, perhaps waiting to see how well other deals are received before making a final call.

Sparebank 1 Boligkreditt opened books for a seven-year €1 billion covered bond backed by prime Norwegian residential mortgages on Tuesday. The deal attracted a granular, but not hugely oversubscribed book, after pricing with a small new issue premium in a busy market.

The new issue covered bond market gathered momentum on Tuesday with two fresh deals, including one from UniCredit which should substantially cut its cost of funding.

Despite the start of a new quarter, investors are not pushing money into covered bonds, secondary market dealers told The Cover on Monday. Bunds have weakened in line with US Treasuries but the rise in yields has not tempted insurance companies to buy bonds. They are waiting for key US employment data due on Friday, which could trigger a further yield hike, before making any move, said bankers.

Medium-sized banks in Italy and Austria could be next in line to sign up to the European Covered Bond Label, an initiative that has been dominated in its first six months by larger issuers, the European Covered Bond Council told The Cover on Monday.

Deutsche Hypothekenbank 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 which has caused fixed income volatility.

The Dutch arm of BNP Paribas Personal Finance will begin a roadshow next week for its second ever publicly sold RMBS.

Credit markets are on the back foot but bankers say the outlook for covered bonds is still relatively benign. However, investors are becoming more price sensitive and issuers need to take into account the changed market environment if a mishap is to be avoided, bankers said.

This week’s spike in volatility was a warning shot. It was unreasonable to expect the grab for fixed income yield to last for ever — and the world needed reminding that markets don’t just go up. After nearly eight months of one-way traffic it was hardly surprising that a false sense of security had developed.

The covered bond pipeline is building with several transactions rumoured, a New Zealand bank on the road and a German issuer on Friday mandating banks for a trade next week.