Currencies

Landesbank Hessen-Thueringen Girozentrale (Helaba) on Tuesday became only the second issuer in four years to price a benchmark covered bond through mid-swaps.

Terra Boligkreditt has issued its first €1bn covered bond, following extensive marketing. Not surprisingly, given the paucity of euro denominated covered bond supply, there was plenty of demand from a wide range of investors across Europe.

HSH Nordbank has taken the unusual step of using a synthetic securitisation that frees up no regulatory capital at all. Instead, the credit protection provided by KfW on a portfolio of SME loans means they can now be used as collateral in HSH’s public sector Pfandbriefe — the bank’s most important source of term funding.

Standard & Poor’s has cut BNP Paribas ratings and lowered its outlook on four other French covered bonds issuers because of rising risk in the French banking system. Meanwhile, Moody’s downgraded CIF Euromortgage’s covered bonds after taking the same action on the issuer.

Banca Monte Dei Paschi di Siena’s secondary covered bond spreads are holding firm following another downgrade, but Spanish spreads are weakening after their recent rally. Peripheral borrowers could still bring successful benchmarks, but compression between covered and senior levels means there is less incentive to use valuable collateral, syndicate bankers told The Cover.

After an impressive rally in covered bond spreads, Australian banks are likely to concentrate on offshore markets for covered issuance and use RMBS to tap the domestic buyer base, the Reserve Bank of Australia’s assistant governor for financial markets said on Monday.

Norway’s Terra Boligkreditt began a week long roadshow on Monday, ahead of what could be its first ever jumbo covered bond. But the prospect of a limit on Norwegian covered bond issuance should prompt questions from investors.

Bankinter’s blowout three year Cédulas was a trade that had seemed almost unimaginable until the curious decision by Moody’s to reaffirm Spain’s Baa3 rating. The agency’s reprieve has opened a funding window for other less systemically important covered bond issuers who want to demonstrate that they still have market access. But borrowers must be ready to move quickly as sentiment could easily sour.

The increase in retained issuance will have a lasting impact on the primary covered bond market and could reduce benchmark supply to ‘showcase transactions’, Barclays analysts warn.

Standard & Poor’s cut its rating on another pair of Cédulas programmes this week, but the stellar result for Bankinter and UniCredit showed single-A rated trades can still find a stampeding demand. UK buyers bought more than expected in both deals, as syndicate leads pointed to a new class of accounts that could support peripheral transactions.

Bankinter on Thursday swiftly followed peripheral peer UniCredit’s success from the day before. The Spanish borrower launched a blow-out three year benchmark trade 20bp inside initial price thoughts, as traders struggled to keep up with a big spread rally in peripheral paper.

As part of a long term shift in its funding strategy, France’s Crédit Foncier is to start issuing RMBS alongside covered bonds. It is set to begin with a private placement in the coming weeks.