Covered Bonds

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.

Investors are cash-rich and covered bond spreads look set to remain fairly stable – ideal conditions for covered bond issuance. However, deal flow is set to remain quiet as most issuers are well funded, and those that could do deals are about to enter blackout period.

French and German covered bonds have outperformed sovereign and agency debt from the same countries, and investors would now benefit from switching out of covered bonds, Barclays analysts have advised. But traders countered that a dearth of new issuance is preventing such profit taking, and will help keep core covered bond spreads tight in the short term.

Raiffeisenlandesbank Niederösterreich-Wien made its debut in the Swiss franc market on Thursday, with a Sfr150m 1% November 2020 covered bond.

It's hard to make banks adhere to CMBS disclosure standards if investors are happy to ignore them. The buyside only has itself to blame for not insisting on proper transparency.

Norddeutsche Landesbank sold a blow-out debut dollar covered bond on Wednesday, becoming the first German borrower to tap the 144A covered market since 2006.