Covered Bonds

Virgin Money, the bank that acquired Northern Rock’s performing mortgage book, opened books for its Gosforth 2012-2 on Wednesday. The RMBS transaction shows the publicly syndicated ABS issuance can still make sense despite the cheap funding offered by the Bank of England’s Funding for Lending Scheme (FLS).

Deutsche Pfandbriefbank launched a £250m seven year covered bond on Tuesday morning at a level that surprised bankers who thought the bonds might not be fully placed. Leads Goldman Sachs and Nomura opened books at 90bp over Gilts, a level that one lead told The Cover offered relative value versus the seven year part of the curve.

Crédit Mutuel-CIC is poised to launch its debut covered bond in dollars, a deal that would have come last week if not for Hurricane Sandy, The Cover understands. Thursday will be the first opportunity this week for the issuer, according to a person familiar with the matter, due to the US presidential election on Tuesday.

Santander Totta and Caixa Geral de Depósitos, two of Portugal’s leading banks, are both considering whether to issue senior or covered bond deals, in the wake of Banco Espírito Santo’s breakthrough senior issue earlier this week. Bankers say neither bank has decided which route to go down.

Landesbank Hessen-Thüringen Girozentrale (Helaba) this week launched the first benchmark covered bond from core Europe in over a month and became only the second issuer in four years to price a benchmark trade through mid-swaps.

A sustained spread rally drew Suncorp Metway back to the covered bond market on Thursday. The borrower had originally scheduled its second Australian dollar benchmark for 2013, but found funding conditions too attractive to ignore.

The globalisation of the covered bond market is poised to take another leap forward: Sumitomo Mitsui Banking Corp (SMBC) is understood to be in advanced discussions with France’s Autorité des Marchés Financiers (AMF) with a view to issuing a covered bond under the French Obligation Foncière (OF) legal framework, writes Bill Thornhill.

Norway’s Terra Boligkreditt this week managed to secure its first €1bn-sized covered bond on the back of a €2.5bn book, with nearly a third of the 130 investors involved being new to the borrower.

Covered bonds from two Japanese banks look increasingly likely. But, in a strange twist, one of the deals nearing fruition could launch under European law, while the other looks set to be structured under local contract law.

A sustained spread rally drew Suncorp Metway back to the covered bond market on Thursday. The borrower had originally scheduled a second Australian dollar benchmark for 2013, but found funding conditions too attractive to ignore.

Fitch has downgraded the covered bonds Realkredit Danmark uses to fund adjustable rate mortgage loans, just weeks before the Danish auctions begin. Meanwhile, European covered bond downgrades have increased sharply, Moody’s reported.

This week’s trades from Terra Boligkreditt and Landesbank Hessen-Thueringen (Helaba) performed well in the secondary market on Wednesday. However, the lower rated Norwegian deal shone brighter, paying testimony not only to the strength of the jurisdiction and collateral but also to Terra’s exceptional marketing effort.