Covered Bonds

Portugal’s Caixa Geral de Depósitos (CGD) bought back €908m of its own covered bonds this week, in a deal that brought in 29% of the outstanding paper.

Two new issues from opposite ends of the credit spectrum revived the supply starved euro covered bond market this week.

The primary market kept up momentum on Thursday as WL Bank priced its €500m 10 year Pfandbrief and Lloyds opened books for a sterling 15 year deal, with both transactions well received. Banco Popular Espanol’s deal has held in, despite underlying concerns about the periphery markets — and Spain in particular.

The European Central Bank is unlikely to be considering winding up its second covered bond programme, bankers have told The Cover. The ECB has nothing to gain from making any public statement, covered bond bankers said, adding that it would be well advised to keep its powder dry as buoyant conditions could change before the programme expires.

Banco Popular Espanol has opened and closed books for a €500m five year Cédulas. The small size of the transaction alongside a general scarcity of supply has ensured its success, despite the long tenor and absence of a new issue premium.

Chilean banks could soon be able to issue a new type of “covered bond style” mortgage bond under a proposed framework from the country’s central bank and financial regulator. The bonds would be similar to covered bonds, according to a consultation paper jointly published by the two institutions. However, the new instrument would lack key features such as ring-fencing and dual recourse, The Cover understands.

Strong core issuers can look forward to zero concession on their new benchmarks, if any decide to pull the trigger. Lesser names should still require a premium to price a successful trade, but with spreads moving tighter concessions are falling across the board.

Nationwide spurned the euro market again and instead turned to the US and UK for its first RMBS deal of the year. Taking account of the two year longer maturity, the funding level was tighter compared to its recent sterling covered bond and illustrated the US market’s greater familiarity with ABS in general and UK deals in particular.

Portugal’s Caixa Geral de Depósitos (CGD) bought €908m of its own covered bonds, representing 29% of the outstanding. This is the second highest take up of a covered bond tender and well above the level that the borrower had aimed for. Millennium BCP’s tender, due next week should have an equally strong result.

Westpac New Zealand came back for a second helping of its debut Swiss franc covered bond on Tuesday, increasing the deal by Sfr50m on Tuesday morning amid a quiet market.

Although the technical market backdrop continues to look strong, fundamental concerns lurk just below the surface. In the last 48 hours both Pimco and the prime minister of Luxembourg have raised concerns about the outlook for Greece and the rest of Europe. Against this backdrop, German Pandbriefe cover pools are still exposed to peripheral Europe, latest analysis shows.

Top tier names can offer zero premiums on primary trades but lower ranked issuers have no such luxury, syndicate officials told The Cover on Monday.