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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
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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 European Banking Authority (EBA) believes covered bonds should keep their preferential risk weighting in principle, but that the market needs reform. It wants covered bond frameworks to converge to a common standard in certain important areas, and it may need this within a two-year time frame.
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The preferred regulatory status of covered bonds is not about to be withdrawn but, in light of recent comments from the European Central Bank’s executive board member, Yves Mersch, it is likely that regulators will increase their scrutiny of the product. His remarks dovetail with the European Banking Authority’s initiative to set a definitive standard for all covered bonds.
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A draft document circulated by the European Commission suggests that banks will need to sell a representative sample of their covered bond liquidity portfolio as a condition for their eligibility into the top rank of the liquidity coverage ratio (LCR). The clause is likely to be welcomed by dealers but is not fit for purpose because it will not demonstrate liquidity in times of stress.