Currencies

Covered bond issuance after the summer break is expected to be front-loaded, with a busy September likely to be followed by a quiet fourth quarter, a major covered bond issuer told The Cover on Wednesday. Nearly €80bn has been issued this year and a further €50bn could follow.

Banco Espirito Santo’s outstanding covered bond is bid only, and though little flow has been reported, dealers believe the offer is likely to be as much as 100bp tighter. In other news, Caffil’s bonds have performed well over the past month, outperforming the rest of the jurisdiction, partly driven by a new French law that limits the firm's litigation exposure by €66m which will considerably reduce the probability of a covered bond payment disruption.

Moody’s finally got round to taking rating action on over 40 Spanish multi-Cédulas covered bonds on Friday — some two years after putting them on review for downgrade. By biding its time the agency avoided the harsh downgrades to junk many had feared would cause forced selling.

RBS announced several proposals related to the swap triggers in its covered bond programme after being downgraded by Moody’s. The plans, which will be subject to an investor vote, will allow RBS to remain the swap counterparty and thereby help it to avoid the higher cost of employing an alternative swap provider as was envisaged under the original swap agreement.

Banca Popolare di Sondrio surprised the market on Tuesday, announcing and pricing its inaugural Obbligazioni Bancarie Garantite via sole lead BNP Paribas. The newcomer which is a slightly larger institution than its more established covered bond peer, Credito Emiliano, offered a deal with a substantial spread pick up enticing a broad swathe of investors. (This article has one comment)

Deutsche Hypothekenbank, NordLB’s commercial real estate subsidiary, opened books on Monday for its first Pfandbrief of the year. Despite the time of year – this deal is the first German issuer to price a deal in the second half of July for over four years – leads attracted a heavily oversubscribed order book. Credit market conditions in the Euro area provided a constructive backdrop for execution, with Bunds stable and periphery markets recovering.

Toronto Dominion’s first legally compliant covered bond stormed the market on Monday morning, raising €1.75bn – €750m more than any of the other five Canadian euro benchmarks that have been launched this year.

The five year area of the covered bond curve saw solid demand in the secondary market this week, especially for bonds originated from outside the European Economic Area (EEA). The rally was driven by speculation that a recent proposed change to the liquidity coverage ratio (LCR), which would allow banks to count such bonds in their liquidity buffers, could be approved.

The first draft of the Pfandbrief Act 2015 offers some remarkable novelties, according to Commerzbank research, which said in its latest weekly publication that proposed changes should not cause any headaches — and may even improve transparency. Moody’s agreed saying that the draft proposals were credit positive.

Deutsche Hypo has mandated joint leads for a €500m five year mortgage Pfandbrief to be launched in the near future.

Landesbank Hessen-Thueringen (Helaba) sealed its place as the largest covered bond issuer so far this year after doubling the size of a seven year public sector backed Pfandbrief on Thursday. The approach, which mirrors last year’s strategy, has enabled the bank to raise a lot of funding at competitive levels while giving investors much needed liquidity, as well as minimising its asset-liability mismatches.

Toronto Dominion and BNP Paribas should be ready to launch the Canadian bank’s first legally compliant covered bond next week after announcing the prospective deal on Wednesday. The announcement was not a total surprise, given that the bank’s programme had been signed off by the regulator in late June. However it has removed uncertainty over timing, which bankers away from the deal commended.