Covered Bonds

Crédit Agricole SCF returned to the covered bond market for the second time this year with its second ever public sector backed deal. And for the first time in the history of the French covered bond market, the deal priced through OATs.

National Australia Bank returned to the covered bond market on Wednesday to issue the longest dated euro deal from an Australian issuer. By virtue of its 12 year duration, the €750m transaction offered a generous spread compared to existing Australian deals and was aptly targeted at yield hungry insurance funds.

Caja Rural Navarra this week priced an inaugural €500m five year covered bond at the tight end of guidance from a comfortably oversubscribed book. But concerns over absolute yield levels and a less than stellar performance of a recent Cajas Rurales Unidas issue could spook investors, bankers away from the deal warned.

Belfius Bank on Tuesday mandated and launched a seven year mortgage backed covered bond with pricing closer to Belgian peer KBC Bank than any of its previous funding.

Bank of Ireland this week brought the first senior unsecured bond from an Irish bank since before the financial crisis, underlining the country’s success in remarketing itself to investors after the EU and IMF bailout in 2010.

Equity and bond market volatility continues to weigh against sentiment and net flows in the covered bond market have been biased to the offered side this week. But traders and investors are sanguine on the outlook for covered bonds, despite market concerns over a possible asset bubble, an end to the Federal Reserve’s quantitative easing and Japanese bond market volatility.

National Australia Bank returned to the covered bond market on Wednesday to issue the longest dated euro covered bond deal from an Australian issuer. The €750m 12 year is expected to appeal to yield hungry insurance funds with its generous spread pick up to existing long dated Australian deals.

Caja Rural Navarra looks set to price its inaugural €500m five year covered bond at the tight end of guidance on an oversubscribed book. But concerns over absolute yield levels and the less than stellar performance of Cajas Rurales Unidas’s recent deal could spook investors, despite the attractive spread, said bankers.

Crédit Agricole SCF returned to the covered bond market for the second time this year with its second ever public sector backed deal. The €1bn 10 year transaction priced through the OAT, which was the first time in the history of the French covered bond market.

The Bank of international Settlements has suggested that local regulators may seek to limit the level of balance sheet encumbrance by linking it to the level of capital that a bank needs to hold.

Belfius Bank on Tuesday followed the footsteps of KBC bank, mandating and launching a seven year mortgage backed covered bond with pricing being closer to its Belgian peer than any previous funding. Deutsche Pfandbriefbank also reopened its March 2020 for an attractively priced €250m tap.

Holidays in Germany and the UK next week shrink the issuance window but covered bond bankers still expect benchmark deals. A seven year tenor makes for simple execution, but Deutsche Pfandbriefbank’s (Pbb) 15 year bond has captured issuers’ imaginations, said syndicate officials.