Covered Bonds

Senior unsecured debt has long been the workhorse of bank funding programmes. But who wants a workhorse when you can have a thoroughbred? Nick Jacob reports on the changing balance in wholesale bank borrowing.

US covered bond legislation is creeping ever closer, despite not having universal support. Its backers hope President Obama will sign the act into law before the end of the year. Bill Thornhill reports.

Bayerische Landesbank on Thursday priced a Eu1.25bn Pfandbrief that paid testimony to the bank’s name and the strength of its collateral pool. The result was positive for the Landesbank sector as a whole given recent rating agency concerns over systemic state support for the sector.

CIF Euromortgage surprised market participants on Thursday, bringing a highly successful 10 year trade to a market many had deemed unreceptive to longer tenors. While Bayerische Landesbank and Eurohypo opted for short dated issuance, bookrunners on CIF’s Obligations Foncièrs benchmark trade were not initially confident in the choice of maturity.

Eurohypo capitalised on a market starved of supply for the last week, completing a Eu1.5bn three year deal on Thursday. Despite coming to market with the same maturity on the same day as German peer Bayerische Landesbank, the order book was two and a half times oversubscribed with orders from more than 115 single accounts - a testament to the strength of demand after a brief lull in issuance.

Ratings uplifts for senior long-term debt issued by German Landesbanks could be a thing of the past, Moody’s has said. For now, covered bond analysts agree that Landesbanks will not be unduly concerned. As long as the domestic bid remains strong, the German Pfandbrief market is unmoved by ratings actions on banks and other asset classes.

Société Générale is expected to finish roadshowing its new covered bond programme on Friday. Given robust market conditions, a launch could follow as soon as next week.

Despite being eclipsed by a trio of euro benchmarks on Thursday, Spain’s Caja Vital Kutxa opened the primary market on Monday. The issuer launched an inaugural Eu200m no-grow trade through joint leads Bilbao Vizcaya Argentaria and Natixis.

After more than a week without benchmark issuance, three euro jumbo deals were launched from core Europe on Thursday, as Bayerische Landesbank and Eurohypo came to market at the short end of the curve, with CIF Euromortage opting for a long dated transaction.

On Wednesday the Australian Treasury announced that it has received ten formal submissions in response to its exposure draft legislation, the Banking Amendment Covered Bonds Bill 2011.

After more than a week without benchmark euro issuance, three such deals were launched from core Europe on Thursday, as Eurohypo and Bayern LB came to market at the short end of the curve, while CIF Euromortage opted for a long dated transaction.