Covered Bonds

Bankinter on Thursday swiftly followed peripheral peer UniCredit’s success from the day before. The Spanish borrower launched a blow-out three year benchmark trade 20bp inside initial price thoughts, as traders struggled to keep up with a big spread rally in peripheral paper.

17 October, 2012 New York Marriott Downtown

As part of a long term shift in its funding strategy, France’s Crédit Foncier is to start issuing RMBS alongside covered bonds. It is set to begin with a private placement in the coming weeks.

UniCredit drew over €1.4bn in orders for a €250m covered bond tap on Wednesday, with peripheral sentiment improving after Spain was spared another rating downgrade. But though investors are eager for southern European FIG issuance, concern over asset encumbrance could push those borrowers than can issue into the senior unsecured market.

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. To address the risk from the rise of secured funding, Norway’s Financial Supervisory Authority is debating whether to follow other jurisdictions and impose limits on covered bond issuance.

Investor sentiment towards Spain and Italy has improved since August, according to a Crédit Agricole survey. However, most buyers’ credit lines are unchanged, which means many still cannot take advantage of remarkable relative value.

Bayerische Landesbank sold its second ever dollar covered bond benchmark on Tuesday, pricing a $500m two year trade that carried one of the lowest ever coupons in the dollar covered bond market.

SNS Bank’s covered bonds have been downgraded, but remain firmly above the increasingly populated and more relevant double-A minus rating threshold. Moreover, with a collateral score that beats many top German and Norwegian issuers, alongside a recently enhanced programme that has Rabobank as the swap provider — its bonds offer tremendous relative value.

Bayerische Landesbank opened books on its first benchmark dollar covered bond since 2005 on Monday. It could price the $500m two year trade later on Monday but may leave books open overnight to attract Asian accounts.

UniCredit has announced that an ex-Bank of America Merrill Lynch investment banker will be joining its ranks at the end of October, to replace outgoing funding and portfolio manager Philipp Waldstein.

Core covered bonds are performing poorly, with low coupons putting investors off, according to Deutsche Bank analysts. Higher yielding peripheral paper could benefit as a result, but the prospect for fresh benchmark trades from southern Europe remains uncertain.

It is with great sadness that we report the death of Padraic Fallon, chairman and chief executive of Euromoney Institutional Investor PLC. He had been fighting cancer over the past year and passed away peacefully in his sleep on Saturday night.