Covered Bonds

Fixed rate mortgages are outpacing adjustable rate lending in Denmark for the first time since 2008, according to the Association of Danish Mortgage Banks. But analysts still expect one year adjustable rate bonds to dominate the December auctions.

After an impressive rally in covered bond spreads, Australian banks are likely to concentrate on offshore markets for covered issuance and use RMBS to tap the domestic buyer base, the Reserve Bank of Australia’s assistant governor for financial markets said on Monday.

Norway’s Terra Boligkreditt began a week long roadshow on Monday, ahead of what could be its first ever jumbo covered bond. But the prospect of a limit on Norwegian covered bond issuance should prompt questions from investors.

October 21-23, 2012 Fontainebleau Miami Beach - Miami, FL

Bankinter’s blowout three year Cédulas was a trade that had seemed almost unimaginable until the curious decision by Moody’s to reaffirm Spain’s Baa3 rating. The agency’s reprieve has opened a funding window for other less systemically important covered bond issuers who want to demonstrate that they still have market access. But borrowers must be ready to move quickly as sentiment could easily sour.

The increase in retained issuance will have a lasting impact on the primary covered bond market and could reduce benchmark supply to ‘showcase transactions’, Barclays analysts warn.

Standard & Poor’s cut its rating on another pair of Cédulas programmes this week, but the stellar result for Bankinter and UniCredit showed single-A rated trades can still find a stampeding demand. UK buyers bought more than expected in both deals, as syndicate leads pointed to a new class of accounts that could support peripheral transactions.

Bankinter leapt into a market that was rallying hard on Spain and devoid of competing supply on Thursday, to launch a six times subscribed three year Cédulas, writes Bill Thornhill.

Bayerische Landesbank broke the record for the lowest coupon for a dollar benchmark covered bond on Tuesday, launching its first publically syndicated Pfandbrief in that currency since 2005.

UniCredit drew over €1.4bn in orders for a €250m covered bond tap on Wednesday amid a resurgence of risk appetite. In doing so, the bank fulfilled a promise to bondholders to take its historic benchmark deal from August up to jumbo size.

Covered bonds may have caused a growth in mortgage lending and an increase in house prices that now pose a threat to the stability of the Norwegian financial sector, the country’s financial regulator said on Tuesday.

Irish Finance Minister Michael Noonan has rejected a private members’ bill to adopt the Danish balance principle for covered bonds but he will investigate whether some elements of the bill could be rolled out.