Covered Bonds

Market conditions are strong and it seems that almost any FIG issuer can do a deal. But that doesn't mean they can take liberties. Investors can be forgetful, but more often they remember when they have been taken for granted.

Deutsche Pfandbriefbank (Pbb) was back in more familiar territory on Wednesday as it launched its first Pfandbrief of 2013, having been busy setting up a new senior unsecured curve in recent months.

Compagnie de Financement Foncier (CFF) has mandated leads for an increase of its November 2022 issue. Its decision to tap may reflect concerns that newly issued benchmarks may not be eligible for repo with the European Central Bank (ECB).

Terra BoligKreditt became the second Norwegian issuer to supply the market this year and the fifth overall to come with a 10 year or longer maturity. The long maturity, despite being more expensive than a five year, will build its curve and should attract new investors.

Deutsche Genossenschafts-Hypothekenbank was in the Pfandbrief market for the first time in more than six years on Tuesday, selling a €500m seven year that followed other German deals this month in hugging the mid-swaps level.

AIB Mortgage Bank and Deutsche Genossenschafts-Hypothekenbank followed Santander and Belfius on Tuesday with €500m trades that were both easily absorbed. AIB was able to fund itself much more cheaply than its previous deal but bankers felt it could have easily issued a longer maturity.

Rabobank’s subsidiary, Obvion, looks set to price the first Dutch syndicated RMBS of the year at the tightest levels since the crisis. Despite that, the headline spread will be nearly ten times wider than where a putative covered bond deal would price.

Covered bond investors hope to increase holdings this year, even with supply expected to shrink, according to Fitch. However investors said they would decrease Cédulas holdings, despite this sector being the most vibrant so far in 2013.

Belgium's Belfius Bank took advantage of a strong market on Monday to launch its second ever deal. Even though the transaction looks set to be priced through both Belgian and French government bonds, there was little price sensitivity in the book.

Banco Santander’s first covered bond for nearly a year, a €2bn five year, surprised the market by hitting the middle part of the curve on Monday. The spread did not change from initial price thoughts to final terms, which showed the plan had been to take a large chunk out of the market, bankers told The Cover.

Deutsche Genossenschafts-Hypothekenbank has hired banks for a mortgage Pfandbrief, which is pencilled in for Tuesday. It may have company from Commerzbank, which The Cover understands is also eyeing Tuesday for Europe’s first ever SME structured covered bond.

The Spanish party continued on Friday when Kutxabank opened books for the fifth Spanish covered bond of the year. Demand for the no-grow €750m four year Cédulas trade was exceptionally strong, paying testimony to the high level of Cédulas redemptions as well as a renewed appetite for risk. But alongside those factors, the bank and its collateral pool are fundamentally sound. Belfius Bank has mandated joint leads for a 10 year.