Covered Bonds

BNP Paribas has jumped in with a €1bn seven year French covered bond, following the excellent reception for HSBC France’s Obligation à l'Habitat and Münchener Hypothekenbank's Pfandbrief.

Persistent interest from domestic investors prompted HSH Nordbank to increase a recent €500m public sector backed bond by €250m.

HSBC SFH, the UK bank’s French subsidiary, has finally launched its second ever euro covered bond, pulling the trigger on a deal rumoured for well over a year. Along with its rarity and top quality collateral, the issuer was able to take advantage of exceptionally strong market conditions following the recent rally in the government bond market.

Turkey’s covered bond market is set to break away from SME-only issuance into mortgage transactions. Garanti Bank is planning a mortgage backed covered bond and several other issuers are keen to use the asset class to fund mortgage lending, said bankers.

The last Dutch covered bond deal in euros was priced over six months ago and, though there are hopes that ING or ABN will return before August, issuers are not in any hurry. However, yield hungry investors were served a rare treat last week when two Dutch issuers supplied investors with RMBS at considerably more attractive high double digit spreads.

Germany’s Sparkasse KölnBonn is preparing to return to the covered bond market with its first benchmark transaction in five years.

Turkey’s covered bond market is set to break away from SME-only issuance into mortgage transactions. Garanti Bank is planning a mortgage backed covered bond and several other issuers are keen to use the asset class to fund mortgage lending, said bankers.

Moody’s published a presale rating report for Vorarlberger Landes-und Hypothekenbank on Thursday ahead of a roadshow that is scheduled to take place next week. It suggests that the collateral is mediocre relative to its Austrian peers but research analysts point out that Hypo Vorarlberg has a solid business model and ownership structure.

Legal changes in Spain’s banking system are positive for covered bond holders and time subordination is no longer a factor in Cédulas recoveries, said Fitch in a report published on Friday.

The prospect of default hung over the covered bond market this week following the downgrade by Moody’s of two Cypriot covered bond programmes. The new Caa2 ratings imply that investors could potentially suffer impairments — the first in the covered bond market for over 200 years.

Commerzbank’s recently-issued SME structured covered bond has been elevated from liquidity category four to liquidity category three in the European Central Bank’s liquidity framework, thereby attracting a much lower haircut. The move should improve the attractiveness of the asset class and could help spur its development.

The primary market remained dormant this week but there are high hopes that a northern European deal will surface next week.