Currencies

China's Ministry of Finance (MoF) is set to auction the second batch of CNH government bonds this year in Hong Kong on November 23. Although it seems the renminbi has secured its inclusion in the IMF’s Special Drawing Rights (SDR) basket, market participants doubt this will give an immediate boost to the CNH market.

The RMB passed through another goalpost on its path to inclusion in the International Monetary Fund’s Special Drawing Rights (SDR) facility on Friday, with the IMF staff saying that the currency meets all the criteria to join the basket. The fund's executive board will make the final call on the issue when it meets on November 30.

Moody’s has withdrawn the Aa3 covered bond ratings of KA Finanz and downgraded those of KA New to Baa2. KA Finanz, which owns the euro benchmarks, has confirmed it will maintain a consistent overcollateralisation ratio and is seeking another rating from Standard & Poor’s. Despite this uncertainty, analysts expect the bonds owned by KA Finanz to outperform its peers.

The Dutch bank has mandated leads to roadshow its inaugural conditional pass-through covered bond.

Banks leapt on demand for Hong Kong dollar medium term notes this week, as better than expected US non-farm payrolls drove rates up in the dollar-pegged currency.

HSH Nordbank issued a €500m five year mortgage Pfandbrief on Thursday. Despite offering an attractive new issue premium and a rare Pfandbrief spread over mid-swaps, leads struggled to fill the order book, with the structural upheaval facing the issuer compounding difficult market conditions.

Deutsche Bank on Thursday priced its latest Samurai deal well wide of its last effort as investors continued to digest its restructuring, while wild swings in the basis swap between yen and dollars buffet other potential issuers in the format.

European benchmark issuance is expected to rise in 2016 led by German banks, which have seen double digit growth in mortgage lending this year, say analysts at Commerzbank. The next largest regional supply is expected from issuers in France, then Spain followed by Canada, say analysts at Société Générale.

Deutsche Hypo priced a €500m six year on Wednesday in line with previous German deals, but with a considerably smaller oversubscription ratio than its previous two issues. Bankers were not hopeful the outlook for covered bonds would improve much in the next few months, but took heart from the fact that most investors are obliged to put their money to work.

The Standard Chartered Renminbi Globalisation Index (RGI) rose 3.26% month on month in September due to the jump in FX turnover for a second consecutive month. However, the bank expects the RGI to fall in Q4 as RMB depreciation expectations are likely to persist in the market.

BBVA returned to the covered bond market for the second time this year on Tuesday, opening books for a long five year. Despite pricing well inside Spanish government Bonos, and even though political instability was causing ructions in neighbouring Portugal, the national champion quickly built an order book unequaled in size in the Cédulas market for nearly four months.

National Bank of Australia issued a €750m seven year covered bond on Monday. The deal didn’t fly off the shelf, even though it offered a substantial premium to other bonds. The lack of ECB repo eligibility and slackening demand in the intermediate part of the curve was blamed.