Euro

Intesa attracted a well oversubscribed book for its €1.25bn 10 year covered bond issued on Wednesday. The transaction did not initially seem to be an obvious trade to do, but the 1.5% yield along with its status as a national champion evidently gave a broad range of investors exactly the right incentives to take part.

The covered bond market experienced a surge in supply this week, confounding expectations, and illustrating how important it is for issuers to seize unusual funding opportunities.

UniCredit’s German subsidiary HypoVereinsbank (HVB) priced a well oversubscribed four year Hypothekenpfandbrief on Tuesday. Following a strong reception for CIBC’s three year on Monday, it’s likely other issuers will be looking to take advantage of the surprisingly strong funding window that has followed last week’s European Central Bank meeting.

UBS has announced a tender offer for a number of deals including one dollar denominated covered bond. The announcement comes in response to an earlier pledge to build up its Total Loss Absorbing Capacity (TLAC), which should be credit positive for its covered bonds, even though the programme is being wound down.

Canadian Imperial Bank of Commerce took advantage of the back-up in three year euro swap yields following the European Central Bank meeting last week to issue a covered bond on Monday. The issuer paid a relatively small concession, funded 10bp more cheaply than it could have done in the dollar market and placed nearly a third with central banks.

The European Central Bank failed to meet the scale of quantitative easing the market expected, though to the extent it can buy a wider range of assets, this could allow it to scale back covered bond purchases, bankers told The Cover.

GlobalCapital and The Cover held a roundtable in November involving new issuers, well recognised names, a leading covered bond investor, and a Commerzbank debt capital markets executive to discuss some of the most pertinent factors affecting the covered bond market today, including relative value, the impact of the ECB’s purchase programme, issuers’ euro funding needs and their strategic marketing approaches.

Australian covered bonds, which offer among the widest spreads for the high credit quality, have been better bid in the secondary market over the past two weeks, but on Wednesday buying interest was reported further out along the curve. The news comes after Fitch and Moody’s published relatively upbeat assessments of the Australian and New Zealand covered bond markets.

A year after the European Central Bank started buying covered bonds for its third purchase programme (CBPP3), the pool of investors that buy eurozone covered bonds has dwindled. But this provides a unique opportunity for issuers ineligible for CBPP3. Canadian banks have brought a welcome injection of attractively priced paper that has engaged a broad audience. And with CBPP3 set to continue for at least another year, the outlook for inaugural deals from new countries is promising. Euro issuance from Singapore, Poland and Turkey should soon be offering investors a broad menu of credits, at potentially interesting spread levels.

The French bank opened books for an eight year benchmark on Tuesday. The initial double digit spread looked generous and ensured the first covered bond to be issued in December got off to a strong start.

Gross covered bond supply is expected to reach €185bn globally next year, up about €10bn from 2015 and the highest since 2011, according to analysts at Barclays.

The French covered bond issuer has mandated leads for its second deal of the year and is expected to open books on Tuesday.