Covered Bonds

Italian and Spanish covered bonds have retrenched some of the previous day’s gains against their respective sovereigns on Tuesday.

After nearly 30 years with Bayerische Landesbank (BayerLB), Peter Mittermayer, head of covered bond syndicate, will retire at the end of this week.

Net covered bond issuance from French borrowers will be negative in 2013, analysts expect, as the country’s mortgage market growth slows and its sovereign downgrade hangs over banks. But France will continue to dominate the primary market.

Société Générale’s Russian subsidiary, DeltaCredit Bank, is expected to place notes of its recently priced covered bond on Tuesday, its treasury told The Cover. It is expected to return with further deals next year as the Russian fledgling covered bond framework continues to restrict local issuers to their domestic market.

This week Commerzbank unveiled a highly rated SME structured covered bond. It offers tremendous hope for the revival of the European economy, as it suggests banks have a way of financing this crucial sector with capital market funding.

The development of the covered bond market took a leap forward this week when Moody’s and Fitch assigned a provisional double A rating to Commerzbank’s €5bn SME-backed structured covered bond programme.

Strong and growing demand for FIG issuance amid declining yields could help issuers from the eurozone periphery reduce reliance on European Central Bank funding, said Fitch Ratings.

BRFkredit has launched a €4bn Euro-medium term note programme with a view to tempting German investors next year with a first quarter benchmark. Until now the Danish mortgage bank had relied on domestic standalone documentation.

National Australia Bank has returned to the euro market with a covered bond that is twice as long as its previous euro financing but at less than half the cost.

KBC Bank offered investors a little festive cheer this week with its generously priced debut covered bond. Though the deal was hailed as a great outcome for the new borrower, a syndicate lead told EuroWeek the deal could have been priced much tighter.

Société Générale decided to act on the liquidity pouring from covered bond investors this week as it printed a five year inside its own secondary curve. Leads collected €3bn of orders, helped by the scarcity of five year French paper and the demand that was evident in KBC’s blowout debut on Monday.

Société Générale was set to price a five year covered bond inside its own curve on Thursday after gathering in €3bn of orders. The deal clearly benefitted from a lack of supply in that maturity this year and comparison with more liquid deals from Belgium this month.