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Four banks brought dual tranche covered bonds in two days this week, to avoid being squeezed in congested market
This year's cumulative total issuance by financial institutions outstrips 2025's levels
◆ Issuer chose larger order size ◆ Strong supply of five year covereds cited ◆ Seventh German covered in three weeks
Data
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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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Aareal Bank capitalised on the momentum created by the two successful French deals issued through mid-swaps on Monday and Tuesday by bringing forward plans to issue a euro-denominated covered bond, opening books on a three year deal on Wednesday rather than waiting until next week.
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The covered bond market passed another milestone this week with core transactions attracting book sizes that were reminiscent of the yieldy peripheral deals seen a year ago, but at spreads well through swaps. With supply likely to slow after September, the European Central Bank ready to absorb a large portion of whatever is subsequently issued and sovereign yields expected to head further into negative territory, the technical squeeze will become much tighter.
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The frenzy of demand for Compagnie de Financement Foncier’s (CFF) five year deal on Tuesday demonstrated that the market’s psychological resistance to sub-Euribor pricing has well and truly crumbled.
