Covered Bonds

Berlin Hannoversche Hypothekenbank (BHH) has issued the first €1bn mortgage backed German Pfandbrief of 2012. And even though it was not triple A rated, the deal achieved the tightest spread of any so far this year. The depth and breadth of demand it attracted not only pays testimony to the scarcity of German supply but also suggests that investors focusing more on capital preservation than on relative value.

Clydesdale Bank will meet investors in London and Scotland this week ahead of a potential sterling trade. It failed to bring an inaugural euro transaction to market last year, but now approaches an undersupplied sterling market with a bolstered balance sheet and strengthened credit story.

Moody’s and Fitch have assigned provisional triple-A ratings to Suncorp Bank’s covered bonds. The borrower is understood to be on the road this week gauging interest for a potential Australian dollar deal, and would be the first Australian bank outside the big four to launch a covered trade.

Royal Bank of Canada looks set to become the first issuer to sell a covered bond in the US as a normal public offering, after receiving Securities and Exchange Commission approval. Until now, covered bond issuers have relied on 144A documentation to sell deals into the US. By attracting greater and broader demand with a full SEC registered offering, tighter pricing and more liquidity should ensue — paving the way for others to follow.

The Label initiative will go live in the final quarter, the European Covered Bond Council confirmed on Tuesday — as The Cover reported on May 11.

The number of investors looking at buying loan portfolios is increasing, and the discounts they are negotiating are falling, according to a survey that should cheer Europe’s capital-hungry banks.

The axe of Moody’s has fallen on Cédulas as the agency continues its European wide review on financial institutions. Unlike their Italian peers, many Spanish covered bonds remain double-A rated, and all retain vital access to ECB funding while the primary market becomes ever more elusive.

Secondary covered bond market activity this week has been dominated by the continuing uncertainty over the political and economic future of Greece which, along with ratings downgrades, has led to selling of Spanish and Italian covered bonds. And with 3CIF still weighing in on sentiment, French covered bonds have not come out unscathed.

Santander UK managed to raise £2.25bn of funding through its Fosse 2012-1 RMBS in a week when Eurozone storm clouds were gathering over the markets. The deal offered bonds across 10 tranches, five currencies and four maturities. And for the first time since 2007, it included double-A rated notes.

Real money accounts are desperate for financial institution paper — but only from the right names. As volatility continues to rock the markets, European covered bond and senior unsecured bankers tried to deduce issuance prospects in the light of OP Mortgage Bank’s successful trade on Wednesday (see separate story). While some are hopeful, others remain extremely doubtful.

Finland’s OP Mortgage Bank shrugged off an appalling market backdrop and ended a two week covered bond drought with a stellar benchmark trade on Wednesday.

OP Mortgage Bank could have easily raised more funding and at tighter levels for its €1.25bn covered bond this week, bankers told The Cover. The strength of demand for Wednesday’s deal was conspicuous at a very early stage, with investors willing to place orders as early as possible to secure an allocation.