Covered Bonds

NordLB launched the first ever aircraft Pfandbrief (Flugzeugpfandbrief) on Tuesday, pricing a twice oversubscribed five year deal at the tight end of guidance.

Münchener Hypothekenbank’s debut dollar benchmark surprised the market and astonished the issuer, which had only envisaged a small private placement. MuHyp’s next benchmark will be a euro trade after the summer break, but though it is not originating new dollar assets the borrower has not ruled out another public deal in that currency.

The short end of core and UK covered bonds are well supported after the European Central Bank (ECB) cut its deposit rate to 0% last week. Peripheral markets remain out of favour on an asset swap basis, but top tier names have outperformed their sovereign.

Münchener Hypothekenbank (MuHyp) will price its first benchmark dollar covered bond on Friday afternoon, launching the deal after receiving strong reverse enquiry from SSA and central bank buyers.

Issuance of Canadian covered bonds is set to slow as local borrowers wait for new legislation before returning to the capital markets. Treasury officials from Bank of Montreal, Toronto Dominion, Canadian Imperial Bank of Commerce and Royal Bank of Canada gathered at a roundtable event in Toronto in June to talk about prospective changes to the Canadian covered bond market and give their consideration to the possibility of SEC or 3(a)(2) registration.

Crédit Agricole Home Loan SFH revived covered bond supply as well as Swiss franc activity from France when it issued a Sfr200m covered bond this week.

Euro denominated covered bond issuance fell to a decade low in the first half of 2012, and though issuance in other currencies has helped take up the slack, the overall volume is still a long way down on last year.

Münchener Hypothekenbank (MuHyp) launched its first benchmark dollar covered bond on Thursday. The borrower opened books on a $500m no-grow three year deal little over a month after it sold an exceptionally successful 10 year euro Pfandbrief.

Australia’s Westpac Banking Corp returned to the euro market to launch the jurisdiction’s first seven year covered bond on Monday. Though the issuer closed the spread gap with its Nordic peers, a trio of competing senior unsecured deals contributed to a slow bookbuild, said syndicate bankers, with some also suggesting guidance had been set too tight.

Bayerische Landesbank launched its first euro benchmark covered bond in over a year on Wednesday, bringing a 10 year public sector backed Pfandbrief originally mandated in 2011.

Bayerische Landesbank (Bayern LB) found strong international demand for its latest 10 year benchmark, which was priced flat to the borrower’s outstanding curve. The €500m trade completed Bayern LB’s 2012 covered bond funding plan, though the issuer’s determination to bring a long dated deal and push for tight pricing limited demand, said syndicate bankers.

Euro denominated covered bond issuance fell to a decade low in the first half of 2012, and though issuance in other currencies has helped take up the slack, the overall volume is still a long way down on last year. However, rating downgrades will oblige banks to post more collateral against swap arrangements and this will drive funding needs materially higher.