Covered Bonds

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.

UBS attracted $3bn in orders for its latest dollar trade, highlighting the depth of demand for the right European name. Swiss spreads are still cheap by historical standards and US buyers still wary of European supply, but dollar issuance from a strong eurozone name was a possibility, said syndicate bankers.

Standard and Poor’s brutal six notch downgrade of the Depfa ACS public sector backed covered bonds, from double A to triple B, matches the severity of downgrades that have been seen in several Spanish multi-Cédulas deals. But unlike those deals, this deal was issued by the Irish entity of a German parent bank.

After months of being forced to pay chunky new issue premiums in fleeting funding windows, issuers suddenly find themselves with a captive market. Building record order books and attracting hundreds of investors has become commonplace, as buyers old and new flock to covered bonds.

Dollar issuance continued its record breaking run on Tuesday, as UBS launched its second benchmark of 2012 in that currency. Sterling and dollars have had record first quarters, though euro supply remains subdued.

Covered bond spreads stabilised on Monday and bids have gingerly returned after last week’s sell-off. Turnover has been relatively low but spreads in core markets have renewed their tightening trend – though peripheral markets are lagging. In the primary market, the newly restructured HSH Nordbank is on the road until Wednesday and may thereafter decide to bring a €500m Pfandbrief, subject to market conditions.

The Cover has updated it global map of the covered bond market to reflect all recent developments by country, such as the emergence of the antipodean markets and the latest legal developments. Each country image links to key data metrics, and for the first time, news stories that are specific to the region.