Currencies

China’s currency was approved to become the fifth member of the IMF’s special drawing rights (SDR) basket of currencies last November. While the new basket only becomes effecting in October 2016, China’s central bank has been campaigning worldwide for a greater role for the IMF’s unit of accounting, with the RMB set to benefit from the strategy.

Compagnie de Financement Foncier took advantage of strong market conditions to issue a long eight year on Monday. Its third covered bond of the year was priced tighter than the previous two and comes as the European Central Bank has become more active in the secondary market.

Covered bonds will help Virgin Money achieve its stated aim of optimising funding costs and extending tenor, especially when taking account of its latest Gosforth RMBS, which gave funding that was both short and more costly compared to covered bonds.

The European Central Bank’s (ECB) decision to include insurance companies in its Corporate Sector Purchase Programme (CSPP), helped JP Morgan’s Sfr200m bond on Friday, allowing undersupplied Swiss investors a chance to buy.

The Italian parliament approved a new law earlier this month that is expected to help finance a broad range of assets. Investors of the secured bonds have recourse to the underlying asset pool as well as an unsecured claim against the issuer.

The soft bullet maturity extension currently being considered for introduction into Germany’s Pfandbriefe law would lower the chance of a payment interruption and could mean issuers need to set aside less collateral to achieve the same rating, said Fitch. Soft bullet bonds would also not be subordinate to hard.

A 10 year deal from JP Morgan on Friday showed US banks are finding more opportunities for Swiss franc funding than their European peers.

Capital markets were roaring this week, but despite increasing signs of frothiness, the euphoria looks set to persist for some time longer.

A pair of rare SSA names kept Kangaroo and Kauri bond supply ticking over this week, as Asian investor appetite drove demand.

Vakifbank will issue the first euro denominated mortgage backed Turkish covered bond next week, a deal other Turkish banks are set to follow. And being the first of its kind, it should send a strong signal to other borrowers in the emerging markets, such as Brazil. With market conditions set to stay strong and the search for yield undiminished, investors are likely to be receptive.

The German association of mortgage banks (VDP) has suggested a potential change in the Pfandbrief law that could result in a change in the maturity structure from hard to soft bullet.

The Asian Development Bank added to a busy few weeks in the Kauri market with a NZ$200m ($140m) five year note on Wednesday.