Currencies

UBI Banca is set to make a return to the covered bond market for the first time in two and a half years. After mandating leads for a benchmark euro deal on Friday, books are expected to open on Monday

The strong reception NIBC encountered for its conditional pass-through covered bond from traditional covered bond investors pays testimony to its regulatory endorsement from the Dutch central bank. This approval gave the product a much wider appeal than was initially expected, suggesting there is scope for a broader range of issuers to consider this structure than was first thought.

The European Banking Authority (EBA) on Monday published the final draft of its Regulatory Technical Standards (RTS) on close correspondence between the fair value of an institution's covered bonds and the fair value of its assets. The document will put an end to an accounting trick that allowed banks to make their capital position appear better than it was.

NIBC has priced the first conditional pass through covered bond in line with guidance building a comfortably oversubscribed book. But whether other issuers will attempt similar deals remains to be seen.

The European Central Bank’s (ECB) clarification of the way in which higher haircuts are applied for retained covered bonds took effect on Tuesday. Crédit Agricole covered bond research praised the new framework for being less harsh than had originally been assumed.

German issuers have struggled to price deals much through swaps this year, but if there was one issuer that could, it was always likely to be Münchener Hypothekenbank. After pricing a €500m five year at 14bp through mid-swaps this time last year, it returned to the covered bond market on Thursday with a more generously priced and larger deal which, despite being this year’s tightest, still managed to offer some performance potential.

HSH Nordbank and Raiffeisenlandesbank Niederösterreich-Wien joined the rush of issuers bringing deals on Wednesday, selling five year and seven year no grow €500m benchmarks, respectively. While RLB NW continued the price tightening trend for Austrian landesbanks, HSH Nordbank offered a generous spread to make sure any rating or reputational concerns among investors were cast aside.

France’s Caisse Francaise De Financement Local returned to the market for the second time this year to issue a 15 year euro deal — the fourth of 2013, but the first from France. It offered a modest premium to the French curve and, being sufficiently different from a host of other covered bonds out at the same time, it was well received.

There were fears that investors had hit their country limits for Ireland earlier this month, when AIB Mortgage Bank’s five year covered bond drew a lukewarm response. But Bank of Ireland disproved this on Wednesday by pulling in a big oversubscription for the longest maturing Irish covered bond issue since the sovereign crisis.

Banca Popolare Dell'Emilia Romagna Società Cooperativa, has mandated leads for a covered bond roadshow in the wake of the Federal Reserve’s surprise decision not to taper its bond purchasing programme. The Fed’s unexpected move should support spreads and issuance, especially for borrowers like the Italian bank that offer high yields, said bankers.

Two successful covered bond deals from issuers in New Zealand and Austria have illustrated that borrowers cannot take investors for granted and should respect both investors’ wishes and the advice of their lead groups.

ANZ New Zealand and Kommunalkredit Austria are poised to price €500m five year covered bonds. Both deals have gone without a hitch, with oversubscriptions from a broad range of investors. However, given the lacklustre performance of other recent deals, leads were cautious on pricing and offered attractive spreads.