Currencies

Calls for breathing space have not deterred issuers with Eika Boligkreditt adding its name to the heavy pipeline.

The People’s Bank of China announced just ahead of the Chinese national holiday of October 1 that it would allow foreign central banks, sovereign wealth funds and international financial organisations to trade in the onshore foreign exchange (FX) markets.

The euro market’s strength over dollars is impelling public sector borrowers to line up the currency for rare or even debut visits — and there are strong signs this opportunity could last longer than earlier windows.

Bankinter repriced the Cédulas market at least 5bp wider, and its own curve by around 15bp wider on Thursday, with a benchmark five year deal. But with the longer term outlook set to improve, the transaction is expected to have tremendous performance potential.

The European Banking Authority’s report on asset encumbrance, published on Thursday, says that European banks’ encumbrance ratios have been relatively steady overall but they are still high in countries severely affected by the sovereign debt crisis, and should be carefully monitored.

The European Commission’s (EC) consultation on covered bond harmonisation is a realistic way forward that should help with the market’s evolution, said analysts on Thursday. The most striking proposal is a regulatory redefinition of a ‘covered bond’ which would be aligned with the Liquidity Coverage Ratio (LCR) and may result in preferential regulatory treatment for conventional deals issued from non-EEA countries.

The beleaguered Austrian lender has announced the completion of its partial sale and split into KA New and KA Finanz. The asset pools of both are high quality but the covered bond ratings of KA New look more vulnerable than those of KA Finanz, analysts said.

As a part of its Capital Markets Union (CMU) initiative the European Commission published a covered bond consultation paper on Wednesday. It is seeking feedback on whether the ‘fragmented’ market would benefit from a pan-European legal framework. It is also seeking views on the use of covered bond structures to finance loans to small and medium sized enterprises.

The European Central Bank has not been active in the covered bond secondary market so far this week and spreads have moved wider again, especially in the high beta peripheral credits, dealers told The Cover on Tuesday.

Raiffeisenlandesbank Niederösterreich-Wien AG has mandated leads for a covered bond roadshow to commence in early October.

Maybank became the first Asia Pacific issuer to launch a Pro-Bond in May 2014. It was the bank’s first foray into the Japanese capital markets, and also represented a useful shot in the arm for the fledgling Pro-Bond initiative. Maybank has since graduated to a Samurai, allowing a useful comparison between the two markets.

Korean banks have pulled back from the Samurai market, as funding costs have moved against them, but some other names have stepped into the breach. Australian banks are a key fixture in the Samurai markets, while the arrival of Maybank this year gives a pointer to future issuance. Asia Pacific financial institutions issuers are also proving instrumental in the steady development of the Pro-Bond market. Volatility in China, however, is not helping anybody. In September, some of Asia Pacific’s leadering FIG borrowers spoke to GlobalCapital about prospects in the Japanese capital markets.