Currencies

The covered bond primary market was quiet on Thursday as weak credit market conditions prevailed, and with this year’s supply double the amount seen in the same period last year, indigestion has weighed on spreads. Though it is still early days, banks with this year’s largest market shares are quite distinct from those of 2015.

Raiffeisen-Landesbank Steiermark and Bayerische Landesbank issued Austrian and German Pfandbrief, respectively, on Wednesday. The fact that the Austrian deal was only just oversubscribed and the German deal was placed only with domestic investors reflected the pernicious influence of the covered bond purchase programme (CBPP3).

Spanish banks are becoming less reliant on the covered bond market, said Fitch, and as a consequence their balance sheets are becoming less encumbered.

Mondelez, the US food and beverage company, on Tuesday priced a dual tranche Swiss franc deal extending its run of Swiss deals to three and drawing praise for its blinding start in the currency.

Deutsche Bank SA, Kookmin Bank, BayernLB and RLB Steiermark have mandated leads for covered bonds to be issued on Wednesday.

Erste Bank issued the first Austrian Pfandbrief of the year, attracting a comfortably oversubscribed book and setting a strong start for issuers from the beleaguered country. At the same time, Deutsche Pfandbriefbank issued a tightly priced and larger than expected German Pfandbrief.

There were dramatic moves in the offshore renminbi market on the morning of January 12 as the spread between onshore RMB (CNY) and offshore RMB (CNH) all but disappeared. And, in a radical development, the People’s Bank of China (PBoC) purchases of CNH in Hong Kong drove the overnight CNH Hong Kong interbank offered rate (CNH Hibor) to a record 66.8%.

Deutsche Pfandbriefbank and Erste bank have mandated joint leads for euro denominated covered bond benchmarks to be launched on Tuesday.

Lloyds and Société Générale both returned to the covered bond market to issue their first euro-denominated benchmarks of the year on Monday. The UK bank issued in much larger size with an order book that grew far more quickly than the book for SG’s deal.

All but one of the primary euro denominated covered bonds issued this year, whether they can be bought by the ECB or not, have widened after issue.

The Estonian government is working on a draft law that will allow local banks to issue covered bonds, said the Ministry of Finance.

The Dutch government has urged the European Commission to address the “unbalanced” regulatory treatment of securitization compared to covered bonds, complaining of “disproportionate” incentives to invest in covered bonds versus ABS.