Currencies

HSH Nordbank opened books on Tuesday on an Aa3-rated €500m no-grow seven year mortgage-backed Pfandbrief, its second covered bond deal of 2014. Bankers said the level of oversubscription was further evidence of the divergence in popularity between covered bonds likely to be included in the ECB’s third covered bond purchase programme (CBPP3) and those which are likely to be outside, such as Tuesday’s other euro-denominated benchmark, from Swedish Covered Bond Corporation.

HSH Nordbank and the Swedish Covered Bond Corporation (SCBC) mandated leads for euro benchmarks that are likely to be launched on Tuesday.

DNB Boligkreditt returned to the euro covered bond market on Monday to issue its first deal of the year. The transaction looked set to price comfortably through mid-swaps, but it did not enjoy the same degree of price tension as recently issued and highly rated core covered bonds that are likely to be included in the European Central Bank’s third purchase programme (CBPP3).

With 340 delegates, more people than ever attended the European Covered Bond Council’s Plenary meeting, held this year in Hotel Savoyen in Vienna. The welcome remark was delivered by Andy Jobst, a senior economist in the European department at the International Monetary Fund (IMF). He spoke about the role of covered bonds in expanding the European Central Bank’s balance sheet and the need for SME financing through securitizations, which regulated investors are not incentivised to buy.

Jozef Prokes, a portfolio manager within the European fixed income team at BlackRock (AuM: €24bn), speaks to The Cover in a podcast interview about the aims of the European Central Bank’s (ECB) third covered bond purchase programme (CBPP3). Prokes addresses a range of topics including the risks investors face with the globalisation of covered bonds, pass-through structures, SME covered bonds and how his firm is coping with low interest rates.

Commerzbank opened books for a €1bn five year mortgage Pfandbrief on Monday, and was set to issue in line with the spread achieved by Compagnie de Financement Foncier (CFF), which issued a deal of the same tenor two weeks ago. The pricing shows that there is no longer a spread between French and German covered bonds.

Covered bonds backed by environmental and social governance (ESG) mortgage loans are expected to become an important component of the booming socially responsible investment market following a ground-breaking Pfandbrief issued this week by Münchener Hypothekenbank (Muhyp). But bringing trades to market will not be without its challenges.

The ECB will refrain from aggressive purchasing during the third covered purchase programme (CBPP3). Ulrich Bindseil, director general of market operations at the European Central Bank, the lead architect of the programme, told The Cover in an exclusive interview that he expects CBPP3 to lead to tighter spreads which will encourage more issuance.

Toronto-Dominion has mandated leads and announced initial price thoughts for its first benchmark US dollar covered bond under Canadian legislation.

The Spanish housing market has started to stabilise as the fall in the value of repossessions has steadied, and house prices have begun to rise for the first time in seven years, according to a report published by Fitch on Thursday.

The ECB announced it has allotted €82.6bn to 255 banks in the first targeted long term refinancing operation (TLTRO) — a figure far below consensus expectations from eurozone economists. While the impact on covered bond secondary markets is likely to be marginal, the news could have positive implications for primary supply, analysts told The Cover on Tuesday morning.

Danske Bank opened books on Wednesday on a triple-A rated five year euro benchmark, its second euro deal of the year coming soon after its seven year sterling transaction early last week. A solid book build blew away Tuesday’s concern that a soft credit market and a series of upcoming potentially disruptive events may have turned the deal sour.