Euro

PKO Bank Hipoteczny, Poland’s largest mortgage lender, has issued its second covered bond since the country’s updated legal framework came into force. The well oversubscribed, tightly priced and broadly distributed deal sets a strong prelude for an expected inaugural euro benchmark later this year.

A vote for the UK to exit the European Union next week is likely to intensely magnify a strong rush into safe haven assets, but some bankers are still confident that after the initial furore of a ‘Brexit’ there could be room for issuers eyeing euro deals in July to go ahead. And, if the UK opts to stay in the EU, issuers are likely to be lining up to print in July.

A rush to safe haven assets amid fears of a UK exit from the European Union crystallised higher Spanish bond yields at a bond auction on Thursday.

Turkish banks are looking to mortgage-backed covered bonds to close asset and liability mismatches and reduce borrowing costs. In the next few years, the asset class will become a cornerstone of their funding plans.

The Swedish covered bond law requiring issuers to hold a minimum overcollateralization ratio of 2% is expected to come into force on June 21.

The Danish covered bond issuer extended its curve and priced a larger deal well inside where its inaugural five year was issued in March and with a fair oversubscription ratio.

Independent covered bond consultant, Richard Kemmish, responds to the Bundesbank’s discussion paper on covered bond asset encumbrance.

The covered bond market could lose its unblemished track record if the market fragments from a lack of harmonisation, said Moody's.The agency’s report comes amid widespread belief that the EC’s drive to harmonise covered bonds has been put on ice.

An discussion paper commissioned by the German central bank suggests that covered bonds can improve a bank’s profitability, but by encumbering assets, risk is asymmetrically shifted to unsecured debt holders resulting in greater fragility.

The French public sector covered bond issuer returned to the market for the fourth time this year to raise €1bn, with the 0.375% coupon being the lowest ever for a Obligation Foncière due 2025. The transaction was heavily reliant on central bank demand and underperformed after becoming free to trade.

The Cover invites market participants to submit 200 word pitches, or nominations, which will form the basis of shortlists that will be voted on in this year’s annual awards.

The European Central Bank is likely to lower the rate of covered bond purchases over the remainder of this year, according to analysts at Rabobank.