Covered Bonds

Aareal Bank launched the third short dated floating rate Pfandbrief in the last week on Friday, after bank treasuries looking for safe haven paper approached the issuer. Several of Aareal’s peers are lining up longer dated benchmark deals, but a surge in Bund futures could put their plans on hold.

When is a covered bond not a covered bond? Commerzbank’s controversial SME structured deal generated much emotion at the IMN covered bond conference in London this week. In a show of hands, almost all delegates thought the issuer should not have been able to market it as a covered bond. EuroWeek looks into the reasons for their disapproval and considers the arguments for the defence. Whoever is right, Commerz has given the market a new headache.

Italy’s inconclusive election result this week failed to dampen overall sentiment in the European FIG market. Two issuers decided the sub debt and covered bond markets were open for deals on Thursday, and low beta names are expected to re-open the senior market next week, though they may pay up for the privilege.

Crédit Agricole braved an uncertain market on Thursday to launch its first covered bond of the year. It was rewarded for its courage with the largest covered bond print in more than a month and a final spread inside its secondary curve, proving that the primary window remains wide open for core issuance.

Europe’s regulators and politicians are looking to promote covered bonds as much as possible, bankers have told EuroWeek. Draft EU policy proposals, seen by EuroWeek, want covered bonds to be raised to level one assets under Basel III’s Liquidity Coverage Ratio (LCR).

Covered bonds are set to be counted as level one assets under Basel III’s liquidity coverage ratio (LCR), according to documents detailing agreements on new capital regulations, seen by EuroWeek.

National Australia Bank has mandated Bank of America Merrill Lynch, Barclays, HSBC, NAB and RBC Capital Markets for a five year dollar covered bond.

Crédit Agricole braved an uncertain market on Thursday to launch its first Obligations à l’Habitat of the year. It was rewarded for its courage with the largest covered bond print in over a month and a final spread inside its secondary curve, proving the primary window remains wide open for core issuance.

Korea Housing Finance Corp (KHFC) received over three times the demand it needed to print its latest $500m covered bond this week, drawing a strong response from European buyers, as well as Asian and US accounts.

Deutsche Pfandbriefbank tapped a recent floating rate mortgage backed covered bond for €150m on Wednesday, although fresh benchmark deals are unlikely in the wake of Italy’s election, said debt bankers. They fear the surge in volatility could close the issuance window for weeks. However, other bankers countered that strong core names would have no trouble bringing transactions.

Turkey’s financial regulator has approved Denizbank’s plan to sell €300m worth of covered bonds in a private placement this year, which should have the support of several supranational agencies, an official at the issuer told The Cover.

Korea Housing Finance Corp opened books on its latest benchmark covered bond on Tuesday. It is only the second dollar deal of the year, and this lack of issuance, together with a triple-digit starting spread should mean a successful outcome, said bankers.