Covered Bonds

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.

Covered bond taps need greater transparency, the European Covered Bond Council and Association for Financial Markets in Europe said on Thursday. The two industry bodies have come up with a joint plan to tackle the problem.

Turkey’s Akbank could pip Garanti Bank to the post and issue the first euro denominated Turkish covered bond backed by residential mortgage assets. The issuer has been on the road pre-marketing a benchmark sized deal. With a higher rating than many Western European deals, and a market starved of supply, the deal should attract good interest, despite its emerging market label.

MTS Credit platform has signed up Crédit Agricole CIB for its long awaited sponsored bank access platform, MTS Prime, it announced on Thursday. MTS Prime gives institutional investors the ability to trade directly on the bank’s order book and responds to regulatory initiatives focussed on transparency and capital adequacy.