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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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The pace of covered bond purchases is likely to slacken next year due to natural market forces, but also because the European Central Bank’s focus will turn to sovereign bond purchases, said Commerzbank analysts in their 2015 outlook published on Wednesday. Despite estimating a €15bn annual decline in supply to €100bn, new regulations which require banks to focus on capital rather than funding will not be overly negative the analysts said in a report published on Wednesday.
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European covered bonds are expected to benefit from strong and increasing regulatory support and an improving sovereign outlook, said Moody’s in its covered bond outlook for 2015. However the positive credit view takes no account of market value which remains negative.
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The European Central Bank increased its purchases of covered bonds in the secondary market last week as primary activity remained subdued, but the increase has only had a marginal impact on spreads.