Covered Bonds

This week’s primary deals have posted a mixed performance, but with the market backdrop still supportive, there is a lot of confidence that spreads will stabilise for the less well placed deals that were seen this week.

KBC Bank and Belfius Bank achieved incredible results this week in terms of their spread levels, which now rival not just the best French covered bond names, but the French and Belgian governments as well

Four peripheral issuers brought covered benchmarks over the last week, but with very different outcomes. While AIB Mortgage Bank and Kuxtabank got excellent receptions, Santander and Bankinter set their own terms and left investors licking their wounds.

Excellent funding conditions drew more covered bond issuers from core Europe to the market this week, with impressive deals done at aggressive spread levels. But bankers cautioned that new issue premiums may have to rise with juicy spreads from peripheral Europe drawing investors’ gaze.

KBC Bank and Belfius Bank achieved incredible results this week in terms of their spread levels, which now rival not just the best French covered bond names, but the French and Belgian governments as well.

Excellent funding conditions drew more covered bond issuers from core Europe to the market this week, with impressive deals done at aggressive spread levels. But bankers cautioned that new issue premiums may have to rise with juicy spreads from peripheral Europe drawing investors’ gaze.

Four peripheral issuers brought covered benchmarks over the last week, but with very different outcomes. While AIB Mortgage Bank and Kuxtabank got excellent receptions, Santander and Bankinter set their own terms and left investors licking their wounds.

ANZ Bank this week priced its first short dated sterling floating rate covered bond in what was also the first such deal since last May.

Compagnie de Financement Foncier supplied the covered bond market with rare French issuance when, on Thursday, it increased its 2.375% November 2022 by €750m to €1.75bn through joint leads Barclays, BNP Paribas, JP Morgan, Natixis and RBS.

KBC Bank was on Thursday morning set to price its second-ever covered bond, following Belfius Bank out to the 10 year maturity but with a larger €750m deal that priced just inside its Belgian rival.

The primary market picked up momentum on Thursday with three benchmark deals and one benchmark sized tap being syndicated. ANZ, Bankinter, KBC and Compagnie de Financement Foncier (CFF) unearthed a over €3bn of demand.

ANZ looks set to price the first sterling FRN since last May and its first ever covered bond in that currency. It has returned to the covered bond market for the first time this year to take advantage of swelling demand in sterling.