Euro

The universe of Spanish covered bond issuers could be poised to expand after Moody’s assigned a provisional rating to the Cédulas Hipotecarias of Caja Rural de Castilla-La Mancha.

Kookmin Bank has abandoned immediate plans to sell the first ever Korean covered bond a few days after announcing the deal, after meeting an investor base depleted by holidays.

Bankers hoped that a covered bond would emerge this week after Lower Saxony got a strong response for its deal on Tuesday. But with no hint of a euro benchmark on Wednesday, issuance hopes have been postponed until the week of August 24. The only flow is in the secondary market, and in the absence of sellers, euro system buying is causing spreads to move one way.

Covered bond supply picked up sharply in July as issuers made up for lost time during May and June. Year-to-date supply may have been stronger than at any time in the past three years but with many destabilising events on the horizon the outlook is precarious.

The amended Polish covered bond law is likely to lead to higher ratings, said Fitch on Monday. Polish covered bonds could achieve a maximum of rating uplift of 10 notches compared to two or three at the moment.

Fitch has upgraded the rating of Turkiye Garanti Bankasi (Garanti) after BBVA took a controlling stake in the bank. The rating action is likely to bode well from a credit perspective for the issuer’s forthcoming covered bond.

The secondary market has become irrelevant for pricing covered bonds. Spreads only reflect the level at which the eurosystem is willing to buy at, and not the rest of the market. It is the strongest signal yet of the disruption the European Central Bank's purchasing is causing.

Moody's assigned a provisional A3 rating to the euro-denominated mortgage covered bonds to be issued by Türkiye Vakiflar Bankasi (VakifBank) on Friday.

Fitch has upgraded the rating of Turkiye Garanti Bankasi (Garanti) after BBVA took a controlling stake in the bank. The rating action is likely to bode well from a credit perspective for the issuer’s forthcoming covered bond.

The Austrian restructuring law that wiped out subordinated debt guaranteed by the state of Carinthia was overturned this week by the Austrian constitutional court (VfGH). However, it is not expected to change the positions of subordinated and senior creditors much. Covered bonds should remain secure, said research analysts at LBBW and Erste Bank.

New issue premiums have fallen slightly and with many transactions going on to perform well in the secondary market, bankers conclude that primary conditions are receptive. However, with August approaching, investors are more likely to be away from their desks and activity is bound to slow.

Muenchener Hypothekenbank (MuHyp) has priced one of the tightest covered bonds of the year.