Covered Bonds

A year on year comparison reveals that the covered bond market is starved of Eurozone supply, particularly in short maturities and noticeably from Germany. Though a new issuer has applied for a Pfandbrief licence, the picture is not likely to change soon and, despite the precarious sovereign backdrop, bankers say spreads could tighten by another 50bp-100bp.

Portugal’s Banco BPI launched the second covered bond tender of the year on Thursday and market participants expect more to follow ahead of the second Long Term Refinancing Operation in February.

Suggestions that UniCredit plans to raise a €25bn covered bond to take advantage of current investor demand are misleading, a source close to the bank’s treasury has told The Cover.

French courts threw out contractual rights when they ruled to protect the owners of the Coeur Défense tower from their creditors. But the answer to this isn’t self-righteous indignation. It’s to beware of any market that’s never seen a default.

With many French and Scandinavian issuers in blackout, the European covered bond pipeline is light on potential candidates for primary supply. Dwindling issuance is forcing investors to look at the secondary market for paper and has contributed to some spread tightening, particularly for Spanish Cédulas, making the prospect of a publicly sold deal from a Spanish national champion not quite so far fetched.

Sparebank 1 Boligkreddit convinced over 110 accounts to participate in the first publically syndicated seven year covered bond in almost six months.

With as many as three benchmarks pricing in different time zones and currencies in the last 48 hours, it is evident that the covered bond sector has evolved from its parochial roots to a truly global market. However as far as the Eurozone is concerned, issuance has been pitiful. This is in part owed to the cheap three year financing provided by the ECB, but also because many issuers are in blackout. As a result there are few offers and spreads look set to tighten.

When legislation giving Australian issuers permission to issue came into force in October, one of the last remaining pieces in the jigsaw of the global covered bond market fell belatedly into place. With the country’s banks now able to issue the equivalent of up to 8% of their Australian assets in covered bonds, the new law has paved the way for the development of a highly liquid, top quality market potentially worth more than A$150bn.

When legislation giving Australian issuers permission to issue came into force in October, one of the last remaining pieces in the jigsaw of the global covered bond market fell belatedly into place. With the country’s banks now able to issue the equivalent of up to 8% of their Australian assets in covered bonds, the new law has paved the way for the development of a highly liquid, top quality market potentially worth more than A$150bn.

Sparebank 1 Boligkreditt priced a €1.25bn seven year trade on Tuesday at the tight end of guidance, taking year to date Norwegian supply to over €4bn.