Covered Bonds

Sampo Housing Loan Bank brought its first benchmark covered bond in almost a year on Thursday, pricing that market’s sixth seven year benchmark deal this month. The borrower mandated Barclays, Credit Suisse, its parent Danske Bank, Natixis and Société Générale for a €1bn no-grow deal on Wednesday.

The Cover brought together a group of central bankers, portfolio managers and investment bankers to discuss the covered bond market in the context of the sovereign debt crisis last month. Despite a fundamental belief in the soundness of the covered bond product, the roundtable participants warned of the dangers of the inextricable link between a sovereign entity, the issuers within its jurisdiction and their covered bond programmes.

Sampo Housing Loan Bank brought its first benchmark covered bond in almost a year on Thursday, pricing a successful €1bn no-grow jumbo trade.

Sweden’s Stadshypotek on Thursday became only the fourth issuer to launch a benchmark Kangaroo covered bond. Despite an explosion of domestic supply this year the global appetite for Australian dollars remains strong, which bodes well for other Nordic issuers looking at inaugural trades.

Sampo Housing Loan Bank on Wednesday mandated for the sixth seven year covered bond benchmark of September, and should price the trade on Thursday. Despite a renewed appetite for risk in the wider market, covered bond supply remains consigned to safer names, but a successful auction for the Spanish sovereign could pave the way for further Cédulas.

BPCE mandated leads for a February 2018 covered bond on Tuesday. And though others borrowers are in the pipe, activity is not expected to be as busy as last week.

This is an edited version of The Cover’s Awards Presentation in Munich last week. It includes the winners and runners up, and an explanation of the methodology behind the choices.

Things started out so well at The Cover’s annual awards dinner in Munich last Thursday. The covered bond community turned out in force, with the winners graciously and soberly accepting awards on stage. But that sobriety couldn't last, of course.

BPCE has returned to the covered bond market for the second time this year to issue a long dated five year. The transaction was priced with a negligible new issue premium and was broadly distributed to high quality accounts. Though clearly a successful trade, it lacked the sparkle of other higher yielding transactions.

After the flurry of covered bond deals seen last week market participants had anticipated that there would be some follow through on Monday. Though it is likely that primary issuance will be seen this week, the supply outlook is likely to remain generally muted over the longer term.

Despite the generally gloomy market conditions that have prevailed for the last year, the German covered bond market has performed well. Though it was feared that tight spreads would sap demand, the need to stay fully invested and be protected against capital erosion has fuelled the market, said panelists at the Euromoney covered bond conference in Munich on Thursday.

The primary covered bond market finished last week in a positive state with as many as nine issuers from six jurisdictions raising as much as €8.5bn across two currencies, on the back of €16.7bn of demand spread across more than 900 orders. Given this superbly constructive backdrop, it is possible that other issuers will be looking to bring deals. For, as history shows, only the nimble footed can be rewarded by the fleeting funding windows that have characterised the markets for much of this year.