Covered Bonds

Senators Corker and Hagan filed an adjusted US Covered Bond Act as an amendment to the Senate version of the Jumpstart Our Business Startups Act (Jobs Act) on Wednesday — nearly a year after the Covered Bond Bill (HR 940) was introduced to the House of Representatives. By aligning the prospective legislation with SME lending and job creation, the Act may draw broader political support and several industry associations have backed the move.

Westpac’s New Zealand unit issued its inaugural Swiss franc deal on Wednesday, sustaining the flow of Australian banks issuing covered bonds under the country's new covered bond legislation, which was implemented last year and allows domestic banks to issue in foreign currencies.

Stadshypotek built the largest ever order book for a Nordic covered bond on Wednesday, with the year’s first euro benchmark from a Swedish issuer.

DNB Boligkreditt showed that, for the right name from the right jurisdiction, yield hungry investors will make concessions to get exposure. The strength of interest for its latest 10 year offering allowed it to push both spread and size, and still leave appetite unsated.

After a four week gestation period, Bankinter priced the first Spanish deal since February 22, and its first funding since January 2011. The transaction was remarkable, not just for its size and pricing, but particularly for its tenor — which at five years, was well beyond the LTRO supported three year point.

DNB Boligkreditt and Leeds Building Society took advantage of very buoyant conditions to launch €2bn 10 year and £250m three year trades respectively. But, with the spread to senior unsecured continuing to tighten, the incentive to issue covered bonds is becoming less clear-cut for higher yielding credits.

Singapore bank covered bonds have moved a step closer with new proposals from the central bank. The prudential policy department of the Monetary Authority of Singapore (MAS) has issued a consultation paper on a regulatory framework for local bank issuance of covered bonds.

Realkredit Danmark began its March auctions on Monday, offering one year bonds in Danish kroner and euros. The borrower is optimistic after strong auction results from other Danish banks in recent weeks, and reported yields of below 1% from its first day of sales.

Spain’s Bankinter launched a long awaited benchmark on Monday, pricing only the fourth euro jumbo in as many weeks. Spreads could widen suddenly if conditions deteriorate, warned analysts, but with supply scarce and curves steep between three to five years, investors will continue to ride the wave of optimism.

New amendments to the CRD IV have given the European ABS market a glimmer of hope that securitisation will no longer be frozen out of bank liquidity buffers. With the recent reliance on covered bonds diverting demand from other asset classes, concern over the product’s regulatory pedestal has grown. That ABS is back in contention is therefore a welcome sign, even if it is too early to herald the market’s rejuvenation.