Covered Bonds

The Swedish Housing Finance Corporation yesterday priced an Eu1bn five year Swedish covered bond backed by prime residential mortgage at a relatively tight though justified spread. But, whether it would have been able to achieve that result had there been competing issuance, is more doubtful.

The Covered Bond Investor Council's transparency working group has published a qualitative and quantitative list of data requirements so that investors can make well informed decisions. A public consultation started on April 14 and comments from all market participants are invited. The final version is expected to be published in September.

La Caixa this week issued its third benchmark cédulas hipotecarias of the year. The issuer replaced a couple of leads and opted for a one year shorter duration than had originally been mooted.

Despite volatility in the Swiss franc market triggered by swap rate movements, CFF got its timing right when it issued its third Swiss franc trade of the year on Wednesday — a Sfr175m May 2016 covered bond via bookrunner Credit Suisse and joint lead Zürcher Kantonalbank.

Coventry Building Society issued its inaugural sterling covered bond on Tuesday. The £750m 4.625% due April 2018, through Barclays Capital and BNP Paribas, followed in the footsteps of Yorkshire Building Society and Abbey National Treasury Services.

Crédit Agricole took advantage of robust dollar denominated demand on Wednesday to issue its first covered bond in dollars and the first issued under the new obligation à l’habitat framework.

Five issuers accessed the covered bond market in three currencies and three tenors this week, raising Eu5.5bn equivalent between them. But from here on, bankers expect most regular issuers to wait until after Easter.

Landesbank Hessen-Thüringen (Helaba) successfully raised Eu1bn at an exceptionally cheap funding level, selling more than half the deal outside Germany, despite the bank being in danger of failing upcoming stress tests.

Crédit Agricole took advantage of robust dollar denominated demand on Wednesday to issue a three and a quarter year floating rate covered bond, which was priced in line with guidance at three month Libor plus 75bp. The deal was notable for being the borrower’s first in dollars and the first issued under the obligation à l'habitat law.

The RMBS market remains active, with an Italian and a UK deal book building, while a Dutch deal has just closed. The funding levels for all of them are more expensive and of a shorter duration, compared with covered bonds from the same issuers. However, as a funding tool covered bonds use more collateral, meaning investors get more protection from the asset pool alone, not to speak of recourse to the issuer.

Landesbank Hessen-Thuringen (Helaba) successfully raised Eu1bn at an exceptionally cheap funding level, selling more than half the deal outside Germany, despite the bank being in danger of failing upcoming stress tests.

After the pricing of Helaba’s Eu1bn 5 year no grow and Crédit Agricole’s $1.5bn 3.25 year, SBAB’s Swedish Covered Bond Corp is in the market on Thursday with a Eu1bn no grow five year. From here on issuance could start to fall — as a number of factors conspire.