Covered Bonds

Danske Bank sold a Skr3bn (€340m) five year deal at 115bp over mid-swaps on Thursday, its first benchmark trade in the currency.

The European Covered Bond Council’s proposed Label Initiative, a quality stamp for the asset class, is still dividing opinion even as it starts to get off the ground. Bankers attending the ECBC’s plenary session in London on Thursday said that some issuers saw no benefit to the initiative and were refusing to absorb any costs associated with it. The project is nonetheless expected to go ahead, with arranging banks expected to bear the moderate costs.

The European Commission has changed Commerzbank’s state aid plan, telling it to wind down non-core assets in Eurohypo, in an acknowledgement of the difficulty lenders face when it comes to selling large assets in current market conditions. The demise of Eurohypo, formally one of the largest German covered bond issuers and a major advocate of the jumbo covered bond concept, marks the end of an era in the Pfandbrief market’s more recent history.

HSH Nordbank made a strong return to covered bonds on Thursday, drawing such strong demand — over 100 accounts participated in the €500m no-grow trade — that leads closed books after only 35 minutes.

Banks will be grateful for another funding route once senior unsecured costs start to rise again. Dual recourse bonds backed by loans to small and medium sized enterprises offer a neat solution. Following a series of privately placed deals, the market should soon be ready for the first public issue.

Norway’s Sparebank 1 Boligkreditt became the latest name to help dollar covered bond issuance continue its record breaking run this week, launching a five year trade on Thursday. Year to date supply in the currency had already surpassed the total sold in every year before 2010, though US buyers remain wary of Eurozone issuance.

Barclays priced its inaugural Swiss franc covered bond on Thursday — a Sfr325m three year FRN — to ride the wave of successful Australian and New Zealand short dated covered bonds that have dominated the Swiss franc FIG market this year.

A starved euro covered bond investor base was treated to two juicy deals on Thursday morning, one from Crédit Agricole and one from HSH Nordbank. Such is the hunger for euro covered paper — and the paucity of supply — that despite books for both transactions being open for less than an hour, a combined 250 accounts placed orders of €5.5bn.

Credit Agricole is due to come with a five year euro benchmark on Thursday and has mandated itself, Deutsche Bank, ING, Natixis and RBS.

The German Association of Pfandbriefbanks (vdp) is set to propose amendments the Pfandbrief Act which should be in place by the start of 2013. The initiative broadly relates to two areas centred on transparency and the role of cover pool administrator.

Barclays announced its inaugural Swiss franc covered bond on Thursday morning — a Sfr200m minimum three year note — to ride the wave of successful Australian and New Zealand short dated covered bonds that have taken over the Swiss franc FIG market this year.

Prudential Insurance in the US has priced a $1bn dual recourse structure that is secured on a pool of legacy sub-prime RMBS but also benefits from a guarantee from the insurance company. Although it has a bullet structure, the cash flows are passed through to noteholders and are sufficient to ensure timely payment of the principal and interest.