Covered Bonds

Aareal Bank has issued the first Pfandbrief of the year, attracting a comfortably oversubscribed book and pricing flat to its curve. Despite the appetite for high yielding risk, the deal showed that there is still plenty of appetite for core covered bonds, ­even if they are backed a high proportion of commercial loans from outside Germany.

Banco Popular Español has added to a succession of covered bonds from peripheral countries this year issuing the longest tenor for any Cédulas issuer since 2010 and in the process attracting over 100 investors. BPCE has also tapped the covered bond market.

The period that S&P allowed issuers to modify their covered bond programmes and meet the agency’s revised swap counterparty criteria came to an end on January 11. Many of the eight programmes that S&P identified, including CFF, have now been affirmed though some, such as DexMA, remain in Watch Negative and others have been downgraded.

Every European FIG issuer to have pushed the boundaries this year has been successful. But for the market rehabilitation to continue real change is needed.

The covered bond market got a shot in the arm on Friday, usually a quiet day for business, when two peripheral issuers launched deals and one core issuer mandated. The appetite for risk was exemplified by the fact that four of this week’s six deals have priced through their sovereign.

The worlds of securitisation and covered bonds are colliding as issuers and investors wrestle with rating volatility. With Commerzbank preparing its ground-breaking SME structured covered bond, which relies on a pass-through structure traditionally used in securitisations, NIBC is looking at a new covered bond programme that would feature a similar structure, writes Bill Thornhill.

UniCredit put on a demonstration of new year risk appetite on Monday when it collected the biggest ever order book for an Italian covered bond. The national champion priced its €1bn seven year from €6.5bn of orders, throwing the door open for second tier Italian names, which bankers are urging to take advantage of the strong market.

Finland’s Nordea Bank this week priced a €1.25bn covered bond flat to its own curve on the back of a comfortably oversubscribed book. Given the strength and rarity of the credit and jurisdiction, a positive result was never in doubt, lead managers told EuroWeek.

Bankinter took advantage of robust demand for higher yielding Spanish bank debt and, following the huge success of Caixa­bank’s three year senior deal, launched a 3.5 year Cédulas on Thursday. The search for yield was in evidence as the borrower attracted a book that was more than seven times covered.

The Basel Committee for Banking Supervision’s decision to expand the range of assets banks can hold in their liquidity coverage ratio (LCR) has split the covered bond market over what will happen to bonds rated lower than AA-.

Commonwealth Bank of Australia has demonstrated how globalised the covered bond market has become by selling almost half of the year’s first dollar covered bond benchmark to European buyers.

Commonwealth Bank of Australia has demonstrated how globalised the covered bond market has become by selling almost half of the year’s first dollar covered bond benchmark to European buyers. CBA issued its deal, Australia’s first covered bond of 2013, on Wednesday. The $2bn 0.75% January 2016 was priced at the tight end of guidance at 32bp over mid-swaps and 44bp over US Treasuries through joint leads Barclays, CBA and RBC Capital Markets.