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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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With a sizeable portfolio of variable rate mortgages, it makes sense for Stadshypotek to issue floating rate covered bonds, as this minimises interest rate risk and swap costs. Though the investor base for floating format covered bonds is still in its infancy, treatment of the asset class in bank liquidity buffers could soon be improved, and since FRNs are better suited for bank liquidity books, this is a market that could potentially deliver a substantial stream of demand.
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Five Portuguese covered bond deals were upgraded on Friday by Moody’s, in a move that had been widely anticipated following the sovereign upgrade. But the upgrades came against an increasingly volatile credit backdrop which saw some peripheral covered bonds soften as their respective sovereign markets came under pressure.
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Issuers have started to respond to a shift in asset allocation approaches from money market funds, with highly rated borrowers selling sub-one year covered notes and lower rated names contemplating entering the commercial paper market.