Euro

Nordea issued a notice on Friday seeking the consent of covered bond investors to agree to the terms of a deed poll and a new guarantee mechanism that will align its Finnish covered bond programme with its Danish, Norwegian and Swedish programmes. Moody’s says the proposal will not affect the credit rating.

Euro covered bond supply is up by more than 60% compared to this time last year, and with several new issuers emerging this year, last year’s record should be broken. But with the European Central Bank meeting due next week and quarter-end balance sheet considerations coming into play, activity is likely to slow in the weeks ahead.

United Overseas Bank sold a landmark transaction this week, printing the first euro-denominated covered bond from Asia, and plans to become a frequent issuer in the market.

Around 250 delegates attended the 10th LBBW European covered bond forum in Mainz on Thursday. Although the low yield environment is making life difficult for asset managers, relative value is returning and real money buyers are slowly coming back.

The primary market looked less stable on Thursday as a seven year euro deal from Bank of Nova Scotia and a sterling deal from Canadian Imperial Bank of Commerce were slow to build and barely oversubscribed. However, a competing euro seven year from Bankia found strong demand.

Three covered bond issuers launched euro benchmarks on Wednesday with the inaugural transaction from United Overseas Bank of Singapore proving the main attraction. Sparebank 1 Boligkreditt and Belfius Bank also launched deals, with strong demand for the Belgian deal allowing the issuer to pay an extraordinarily tight new issue concession of 1bp.

Danske issued in a larger size and attracted more orders for its covered bond than Deutsche Bank did for its deal. The outcome was surprising given Deutsche’s rarity and higher quality collateral. But in any case the German issuer did well given that it could have done the deal without any support from the Eurosystem.

Westpac has announced a consent solicitation asking investors to agree to a switch in the maturity structure of six covered bonds from hard to soft bullet with a 12 month extension.

The covered bond primary market began slowly this week with just one quickly syndicated €500m German benchmark from Deutsche Apotheker- und Ärztebank (Dapo) emerging. Despite its measly coupon the deal offered a hefty pick up to Germany. Covered bond supply is expected to improve in the week ahead.

The covered bond purchase programme is scheduled to end in March 2017. However, as maturing bonds will be reinvested, the European Central Bank could end up buying up to €40bn per year just to keep its portfolio from shrinking, according to new analysis from Crédit Agricole CIB research.

The European covered bond market has had to adapt to the distorting influence of the European Central Bank’s Covered Bond Purchase Programme (CBPP3), an unsettled outlook for global credit and ever lower yields. But relative value has improved with widening spreads, and real money investors are starting to return.

Torsten Elling will not be returning to Barclays, having been on paternity leave since June last year, The Cover understands.