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◆ Banker said bonds offered no new issue concession ◆ Shinhan’s was one of six covered bonds on Monday ◆ Deal was fifth Korean covered this year
Bankers predict steady flow of covered bonds issuance over coming weeks despite recent spike in activity
◆ Spread tightened by 8bp from IPTs ◆ Banker said order book quality stayed high despite losing some investors ◆ Second Czech covered in two days
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Deal reviews
◆ Banker said bonds offered no new issue concession ◆ Shinhan’s was one of six covered bonds on Monday ◆ Deal was fifth Korean covered this year
◆ Rare five year tenor ◆ Competitive pricing versus dollars and euros ◆ Sixth sterling covered from Canada this year
Issuance may relent next week but the pipeline for the rest of the year is uncertain, say experts
◆ Issuer tightened spread by 7bp on Tuesday ◆ First euro covered from ANZ NZ since 2023 ◆ Acting treasurer said €750m was the target
Opinion
Covered bond issuers have been reluctant to issue on the same day as a central bank announcement, but this is starting to change
The new European Secured Note market is keen to secure regulatory recognition for the new product but there are advantages to not having it
If it looks like a covered bond, acts like a covered bond and prices like a covered bond, then it probably should be treated like one
Easily dismissed as "fast money" with all the negative implications that can bring in the primary bond market, hedge funds are becoming increasingly important to covered bond issuers
Analysis
Covered market provides 'the deepest pocket of demand' among FIG asset classes
Asset class is about 5bp wider than at start of the year
Comments from regulators welcomed by ECBC head
After the busiest June since 2010, banks are well progressed in the covered funding programmes
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More from covered bonds
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Covered bonds saw a week of two halves, characterised by profit taking and weakness to begin with which was followed by a more stable tone over the rest of the week. And, with offers likely to dry up before long, the first zero coupon new issue covered bond could be seen in a few weeks.
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Nationwide and Caixabank launched the only two covered bonds this week. Despite both issuers getting the funding they wanted, the final outcome was poor in comparison to past standards.
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Covered bonds are dual recourse and backed by a dynamic collateral pool that ensures their highest quality at all times. In contrast RMBS are backed by a static pool, and because the instrument is non-recourse, the issuer in extreme circumstances would probably not be allowed to support the deal. For these and other reasons, the regulatory treatment of Van Lanschot’s conditional pass through (CPT) covered bond is justified as it is a safer instrument than Rabobank’s RMBS, says covered bond consultant Richard Kemmish in response to an opinion piece published by The Cover suggesting the oppposite.