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◆ Issuer chose larger order size ◆ Strong supply of five year covereds cited ◆ Seventh German covered in three weeks
◆ 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
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Deal reviews
◆ Issuer chose larger order size ◆ Strong supply of five year covereds cited ◆ Seventh German covered in three weeks
◆ 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
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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20 covered bond issuers defaulted in the 10 years to the end of 2013, but no covered bond experienced a default, said Moody’s in a special comment on covered bond rating transition rates. Covered bond ratings, which exhibited a lower rate of downgrades than issuer ratings, began to stabilise in 2013
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Scope Ratings has taken a big bet on the success of Europe’s bank resolution scheme with its covered bond rating method, published for comment on Thursday. Compared to the main rating agencies, Scope drastically downgrades the importance of covered bond collateral.
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Covered bond yields continued to tumble this week with coupons from German and French euro issuers skimming just above zero, at 0.025% and 0.125% respectively. Meanwhile, in Switzerland the first Swiss franc covered bond was issued with a negative yield of 0.37%. The deals may be good news for the issuers concerned, but investors are hurting. And by forcing them down the credit curve the seeds of the next crisis are potentially being sown.