Euro

Bank of Montreal (BMO) returned to the covered bond market for the fourth time this year to issue its third benchmark in euros. At seven years, the tenor was longer than the borrower’s previous two benchmarks, but at €1bn it was considerably smaller even with a wider spread.

The Norwegian bank has mandated leads for its second covered bond of the year, to be launched on Tuesday.

The European Central Bank amended its collateral rules last week to allow banks to post non-marketable collateral for its regular monetary operations, as long as it is packaged in covered bond-style dual recourse instruments.

Many emerging markets and developing countries are in the process of setting up, or have set up covered bond regimes, said Loic Chiquer, chief technical specialist at the World Bank. Speaking at the European Covered Bond Council plenary session on Wednesday, Chiquer painted a bullish picture for the continued globalisation of covered bonds.

Fear not, the European Central Bank may be squeezing investors out of the market but the day will come when it eventually exits. And when it does, spreads will widen and buyers will be back, said bankers at the Euromoney Covered Bond Congress in Barcelona on Thursday - where 1,115 delegates registered their attendance.

The Spanish Cédulas outlook is set to improve, not just because the economy is experiencing one of the strongest growth rates in Europe, but also because legislative proposals will bring the market into line with best practice. However, there is still no consensus on how the proposals will be implemented, said panellists at the European Covered Bond Council’s plenary session in Barcelona on Wednesday.

September 2016 is touted as the earliest possible date for the wind down of both quantitative easing and the Covered Bond Purchase Programme (CBPP3). But with little visibility beyond these bare details, bankers at the European Covered Bond Council Plenary Meeting in Barcelona were divided as to what impact, if any, the wind down will have on the covered bond market.

Cariparma Crédit Agricole printed a €1bn June 2023 mortgage-backed bond on Tuesday. The healthy new issue premium offered by the issuer suggests investors are demanding more of a premium following the glut of supply recently.

Hypo Tirol has named leads for a new benchmark euro-denominated mortgage covered bond. Austrian mortgage-backed bond issuance appears to gathering momentum after a long Heta hangover. However, rival bankers say that lingering concerns about the level of exposure the mortgage banks have to Heta may hamper the deal.

SR-Boligkreditt has mandated leads for a series of investor meetings with a view to issuing its first deal.

Valuations of CBPP3 eligible covered bonds have overshot fundamentals says Pimco’s Kristion Mierau. While his portfolio has grown this year, his firm is navigating away from price dislocations caused by the European Central Bank’s purchase programme.

UniCredit Italy has become the first Italian bank to break the mid swaps barrier, pricing a €500m five year floating rate deal at three month Euribor +7bp, which equated to 3bp through on a mid swaps basis.