Currencies

Covered bond issuance in June was the strongest since 2011 and issuance over the year as a whole is in line to meet the €130bn forecast that Barclays research analysts made in December last year, the bank said on Thursday. UK, Canadian and Italian issuance may bolster supply over the second half of the year other bankers and analysts said.

Bayerische Landesbank took advantage of an empty market to price what could be one of the last covered bonds before the summer lull kicks in. The €500m seven year Pfandbrief attracted a substantially oversubscribed and granular book that gained solid momentum from the start — in contrast to other recently issued Pfandbrief.

Standard & Poor's upgraded BBVA’s mortgage backed covered bond programme from A to AA- after the European close on Tuesday, while Fitch upgraded UniCredit’s Italian programme from A+ to AA-. The upgrades take the programmes towards a level that gives regulatory benefits. UniCredit has most to gain.

Canadian Imperial Bank of Commerce recently updated its covered bond prospectus, giving rise to speculation that it could return to the covered bond market this year. CIBC is only one of two Canadian banks that have not issued in euros in 2014 and was last seen in the market in July 2013.

Arrears in foreign assets backing German mortgage Pfandbrief increased by 40% in the first quarter of 2014, according to Moody’s, although the share of foreign mortgages in Pfandbrief cover pools is on a steady decline.

Banca Monte dei Paschi di Siena’s (MPS) covered bonds’ outperformed the market on Monday after Moody’s upgraded them from Ba1 to Baa3 following the European close on Friday. The new rating more than halves the capital charge as the bonds move into investment grade territory, opening up demand to a much larger investor base. This swell of new interest should ensure that MPS outperforms the market over the summer.

Flows were mostly focused on buying of peripheral national champions on Monday, as the impending liquidity injection from the European Central Bank is expected to crimp supply prospects by more from these regions. This is especially the case in multi-Cédulus where RBS research picked 10 prospective deals that may outperform. In the primary market, talk was focussed on the wrapped collateralised debt obligation being marketed to covered bond investors until Tuesday by Goldman Sachs.

Well done Goldman Sachs, you’ve managed to devise a structure that has both the covered bond market and the ABS market talking at the same time. The covered bond market seems to have adopted the attitude that ‘imitation is the sincerest form of flattery, just don’t try to pass it off as a real covered bond’. The ABS market seem to have adopted an ‘anything the covered bond market can do..’ attitude.

Banks that have held a leading market share of the covered bond business are also dominant across all liquid fixed income markets. Being German helps, but those institutions that offer genuine added value in terms of trading and advisory services have performed consistently well. The Cover examines the driving forces between the winners and losers in covered bonds.

Since Goldman’s FIGSCO (Fixed Income Global Structured Covered Obligation) trade hit the screen, capital markets commentators, The Cover included, have been scratching heads and stroking beards about what it actually is.

Toronto-Dominion Bank could become the next Canadian bank to issue a covered bond after it received regulatory approval from the Canada Mortgage and Housing Corp (CMHC) this week. The sign off comes weeks after Canada set out guidelines on the liquidity coverage ratio.

Goldman Sachs may have been hoping that it could get away with calling its newly structured triple recourse hybrid a covered bond. Though it is being marketed to covered bond investors, FIGSCO is clearly nothing like a classical covered bond. But Commerzbank, NIBC and NordLB all encountered controversy when they successfully issued innovative deals, suggesting the clumsily named acronym may be a success – especially in an environment of furious yield chasing and a shrinking triple A universe.