Euro

The European Central Bank has announced changes to its collateral rules affecting the use of self- issued retained covered bonds. As a consequence, publicly syndicated issuance should become more attractive, which should lead to an increase covered bond supply, giving the ECB more material for its covered bond purchase programme (CBPP3).

Though market conditions are strong and this week’s supply was easily digested, issuers cannot take anything for granted, as Friday’s public sector deal from Deutsche Pfandbriefbank (PBB) showed. Activity is expected to slow a little next week and the week after, before the market closes for the year.

La Caisse Centrale Desjardins du Quebec (CCDJ) issued a €1bn five year covered bond on Thursday which offered the widest spread for a Canadian bank this year, but with little new issue premium.

Monte dei Paschi di Siena (MPS) issued a €1bn 10 year Obbligazioni Bancarie Garantite on a comfortably oversubscribed book on Thursday, paying investors a rare triple digit spread, a coupon of over 2% and a 65bp spread over BTPs. With the European Central Bank expected to cut the deposit rate in December, carry trades are once again back in vogue.

BNP Paribas has appointed Rupert Lewis head of European bond syndicate.

The Dutch bank has mandated leads to roadshow its first covered bond. At the same time Fitch and Standard and Poor’s have both published presale reports and assigned triple A ratings for the conditional pass through (CPT structure.

The European Commission’s (EC) consultation on covered bond harmonisation may have far reaching consequences. But ultimately, since the market never suffered from an accepted problem reform could be minimal and slow to come about, said Standard and Poor’s.

A far lower proportion of investors plan on reduce their covered bond portfolios next year compared to this year according to a survey conducted by Société Générale. Most of those asked expect the European Central Bank’s purchase programme (CBPP3) to be extended, and with spreads likely to remain tight, over half plan on moving down the capital structure.

Danske Bank in Finland, formally known as Sampo Housing Loan Bank, has mandated leads for its first covered bond since September 2012. Meanwhile, La Caisse Centrale Desjardins du Quebec (CCDJ) has also mandated.

The European Central Bank’s purchasing programme is having an unwelcome impact on covered bonds, but the market will remain an intrinsic component of bank financing, and will evolve with new products and structures.

Stadshypotek, the mortgage subsidiary of Svenska Handelsbanken, returned to the market with its first euro denominated covered bond since November 2014. The issuer increased the transaction size and tightened the spread, sending strong signal of confidence to other borrowers considering launching deals before the end of the year.

Deutsche Bank’s subsidiary in Spain successfully issued its first publicly syndicated Cédulas Hipotecarias on Tuesday. The €1bn five year, which attracted a comfortably oversubscribed book, sets a strong foundation for further benchmark supply expected over the next two years.