Covered Bonds

UniCredit put on a demonstration of the New Year’s appetite for risk on Monday morning when it priced a €1bn seven year covered bond from a €6.5bn book. Demand for the deal has been granular with the pricing, at 150bp over mid-swaps, being 90bp through the government curve.

Commerzbank has mandated leads for Europe’s first ever SME structured covered bond. Meanwhile, the success of UniCredit’s seven year on Monday, could spur deals from German, Nordic and possibly Spanish issuers, bankers told The Cover. However, secondary market activity has slowed after a brisk start last week.

Caisse de Refinancement de l'Habitat (CRH) on Friday priced the first covered bond of the year and despite very tight pricing to the OAT it managed to attract high demand, particularly from Germany. Scarcity of supply was always going to be a help, but a 25bp rise in Bund yields in the last few days also played a part.

Two French covered bond issuers have very different outlooks for 2013, with Dexia Municipal Agency on an upward path, while Compagnie de Financement Foncier (CFF), until recently by far the better credit, faces severe disruptions because of ratings uncertainty. Traders believe the spread differential for the two issuers is likely to converge this year and may even cross over.

Caisse de Refinancement de L’Habitat (CRH) has mandated leads for the first covered bond deal of 2013, a 12 year benchmark. But despite record covered bond redemptions this month which should theoretically be positive for supply, bankers are not getting too excited.

The ECBC’s new Label initiative became effective on January 1. It sets out minimum standards for transparency. However those standards fall short of investors’ requirements and Canada has already set the bar higher. The Label’s definition of a covered bond also excludes bonds that are likely to be less vulnerable to ratings volatility.

Caisse de Refinancement de L'Habitat (CRH) has mandated leads for the first covered bond deal of 2013, a 12 year benchmark.

Two French covered bond issuers have very different outlooks for 2013, with Dexia Municipal Agency on an upward path, while Compagnie de Financement Foncier (CFF) faces rating uncertainty, which it hopes to resolve soon. Traders believe the spread differential for the two issuers is likely to converge this year and may even cross over.

Canada Mortgage Housing Corp’s (CMHC) new covered bond guidelines have a host of investor friendly attributes but will also raise credit and market risk in borrower programmes, according to Moody’s.

Italy’s covered bond market will tread water in 2013 in terms of outstanding bonds, say analysts. Issuers remain at the mercy of their sovereign story and a tricky general election is due in the first quarter, but supply could surge if the outlook improves.

Net supply of Spanish covered bonds will fall by €30bn next year as the country’s mortgage market continues to contract and the issuance environment remains challenging, analysts predict. But an improvement in the outlook could prompt a big leap in issuance.

Denizbank is the latest Turkish issuer to turn to covered bonds. It has applied for permission to raise up to €300m in SME-backed bonds, which it intends to sell early next year.