Covered Bonds

The UK’s Clydesdale Bank has finished a domestic roadshow and could launch an inaugural benchmark mid-week after receiving final investor feedback on Tuesday. Australia’s Suncorp Bank, meanwhile, is expected to announce a formal mandate for its own domestic debut later in the week.

Two weeks ago, the markets were full of talk of the disrespect that 3CIF had shown bondholders by keeping them in the dark as to why its bonds had been suspended. But this week Moody’s is the villain.

The prospect of wind farms backing covered bonds emerged this week in a discussion paper from the Climate Bonds Initiative. Although most European jurisdictions confine eligible asset pools to mortgages and public sector loans, cashflows from turbine-generated electricity could provide ideal collateral, the not-for-profit organisation argued

The focus of attention on the secondary covered bond market in the last 48 hours has been firmly on the sovereign market — and France in particular. A 20bp tightening in the 10 year OAT on Thursday and a short lived tightening again on Friday has left French covered bonds looking cheap. But uncertainty is high, bid-offer spreads are wide, clients are sidelined and dealers are looking to pare back inventory.

A phenomenal reception for three Pfandbrief benchmarks this week has raised hopes that fresh German trades will maintain primary momentum next week. Meanwhile, French sovereign and agency paper has tightened strongly in secondary.

Nykredit Realkredit found a strong reception among safety-conscious credit buyers for a rare euro benchmark junior covered bond on Wednesday.

Pfandbrief-starved domestic accounts and international buyers fleeing to quality devoured a trio of German euro benchmark covered bonds this week.

The prospect of wind farms backing covered bonds emerged this week in a discussion paper from the Climate Bonds Initiative.

Royal Bank of Canada is to take covered bonds into the US mainstream with the product’s first SEC-registered public offering, writes Bill Thornhill.

Bankers on Friday said Belgian lenders could be forced into the senior unsecured market for funding if the introduction of covered bond legislation was delayed. Markets expectations were that the legislation would be in place in the third quarter of the year, but now bankers fear that this could slip.

Pfanbrief starved German accounts and international buyers fleeing to quality fell upon dual €500m no grow deals from Landesbank Baden-Württemberg (LBBW) and Deutsche Pfandbriefbank (pbb) on Thursday. A collective €3.4bn in orders across the two trades allowed negative and non-existent premiums respectively, with LBBW’s deal boasting the tightest spread for a euro covered bond benchmark in over a year.

The US dollar denominated covered bond market will open up to all investors thanks to a new tradable index being launched by BNP Paribas and ProShares(R), an ETF provider. The new COBO index allows all investors, including retail, to trade the BNP Paribas Diversified USD Covered Bond Index, which matches all outstanding 144a US dollar covered bond deals.