Currencies

Standard & Poor's has assigned a preliminary triple-A rating to the inaugural €10bn medium term covered bond programme of La Banque Postale Home Loan Obligations de Financement de l'Habitat. Having roadshowed in July, it is poised to take advantage of strong market conditions by pricing its first transaction in the near future.

The Danish auction season kicks off this week with Nykredit’s scheduled to start on Thursday and the other Danish banks expected to follow. The auctions will be notable for offering a new type of longer dated product that should help to address rating agency concerns over asset liability mismatches and help fulfil Basel III’s Net Stable Funding Ratio.

Münchener Hypothekenbank priced a €250m tap of its July 2028 on Wednesday with demand driven by reverse enquiry and short positions among dealers. Despite a lacklustre launch, the rarity of the name and this tenor suggested it would always perform well and Wednesday’s tap proved just that.

Berlin-Hannoversche Hypothekenbank sold a €250m long three year Pfandbrief in floating rate format on Monday, in a deal that was largely distributed among the savings bank networks of lead managers Norddeutsche Landesbank and WGZ Bank.

The European covered bond market was well supported on Monday by a combination of technical and fundamental factors. Negative net issuance is set to increase, this week’s Federal Open Market Committee (FOMC) meeting is expected to be supportive and the outcome of this September’s German elections is looking more certain.

Hungarian legislators have stepped back from making a retroactive change to foreign currency mortgage loan contracts. The government will now consult with the country’s banking association before taking any action, it said on Wednesday. Bankers had feared that such a move would have severely destabilised markets.

The secondary covered bond market remains well supported, with real money profit taking being easily absorbed, dealers told The Cover on Wednesday. Peripheral national champions are in hot demand and even weaker credits like Cajas Rurales Unidas have stabilised, they added.

Bank Austria opened books for its inaugural €500m five year mortgage backed deal on Tuesday, attracting a book subscribed by more than three times from a wide range of investors. The bank was ready to do the deal weeks ago, but held back on expectations that a downgrade of Italy would hit its ratings.

Fitch will not change its covered bond rating methodology while Europe’s new bank directive remains in draft form, it said on Tuesday. The draft directive has made it explicitly clear that in the event of a bank’s resolution, its covered bonds would be protected from being bailed in. However, this has not yet been reflected in covered bond ratings.

Hungary’s government is considering legislation to retroactively alter foreign currency mortgage loans. Mortgage borrowers would then be able to claim cash back from the lending banks, which could have a knock-on effect on covered bondholders. MPs will debate on the law change on Wednesday, but the share price of the country’s OTP Bank has already tumbled on fears that its 2014 profit would be wiped out if the proposal becomes law.

The secondary covered bond market saw modest flows on Friday but dealers reported a stronger bid for core names, in particular long end French deals which have not reacted to downgrades. In contrast, the multi-Cédulas sector remains offered reflecting its large exposures to the recently downgraded Bankia.

United Overseas Bank this week priced Asia’s first tier one Basel III-compliant bonds, getting an S$850m ($670.9m) perpetual non-call five deal away at just 4.9% — a level that even rival bankers grudgingly admitted was tighter than they had expected, writes Frances Yoon.