Covered Bonds

Syndicate officials believe a French or Dutch issuer is most likely to restart the covered bond market in January.

Stephane Bataille, head of syndicate & FIG origination at Landesbank Baden Württemberg in Stuttgart, is expected to leave the firm and join Commerzbank’s FIG origination team in Frankfurt next year. This is the latest in a long line of departures and illustrates the changing fortunes of the two German banks.

Syndicate officials believe a French or Dutch issuer is most likely to restart the covered bond market in January.

Covered bonds will continue to play a prominent part in investor portfolios next year, according to a survey by Natixis. More than 80% of investors also expressed interest in structured covered bonds, though buy-siders away from the survey reckon the level of demand may be overstated, as given the choice buyers will prefer traditional covered bonds.

Covered bonds have been less liquid than RMBS this year, new analysis by Bank of America Merrill Lynch shows.The controversial finding underscores the impression that European RMBS should become eligible for inclusion in Basel III’s Liquidity Coverage Ratio. The case for RMBS inclusion is further underscored by the fact that banks have few funding options, as the senior unsecured market remains practically closed just as heavy government guaranteed redemptions fall due next year.

SNS Bank has asked DZ Bank, Natixis, Rabobank and RBS to organise a series of investor meetings that will start on December 12.

Canadian Imperial Bank of Commerce has priced its first deal after leaving blackout, and the first deal from the jurisdiction in over a month. Canadian banks are not exempt from offering larger premiums to ensure successful execution but continue to find strong support for their product in a market largely closed to European buyers.

Markets stabilised on Tuesday morning following S&P’s announcement that it may cut sovereign ratings across the eurozone, ending three days of sovereign tightening. Overall the tone remains constructive, according to covered bond traders, with better buying in French and peripheral covered bonds. But with only a couple of weeks of trading to go before year end, and covered bond spreads not following sovereigns tighter, issuers are still most likely to wait for an opportunity in January.

Commerzbank will head a number of German banks issuing structured covered bonds next year, market conditions permitting, as momentum gathers in the product’s development.

The covered bond market remains gripped in paralysis as wider sovereign market turmoil continued to weigh in on sentiment. The secondary market remains extremely thin and banks seeking funding liquidity are increasingly turning to the ECB’s repo window.

As Europe dithers and the supremacy of the Atlantic Club gradually fades, power is set to shift towards Asia. Amid this inevitable drift, it is in the common interest of all European nations to recognise their shared values of liberty and freedom and to unify with one voice. Speaking at the DZ Bank conference former German finance minister and Social Democrat politician, Peer Steinbrueck believes the “the only possible route is to go further down the road of integration”.

Covered bond investors, with a collective €265bn of total assets under management, of which €56bn is invested in covered bonds, came together in early November at the DZ Bank Covered Bond Day to talk about the market. Each of these investors represented different parts of the traditional buying base.