Euro

Independent covered bond consultant, Richard Kemmish, responds to the Bundesbank’s discussion paper on covered bond asset encumbrance.

The covered bond market could lose its unblemished track record if the market fragments from a lack of harmonisation, said Moody's.The agency’s report comes amid widespread belief that the EC’s drive to harmonise covered bonds has been put on ice.

An discussion paper commissioned by the German central bank suggests that covered bonds can improve a bank’s profitability, but by encumbering assets, risk is asymmetrically shifted to unsecured debt holders resulting in greater fragility.

The French public sector covered bond issuer returned to the market for the fourth time this year to raise €1bn, with the 0.375% coupon being the lowest ever for a Obligation Foncière due 2025. The transaction was heavily reliant on central bank demand and underperformed after becoming free to trade.

The Cover invites market participants to submit 200 word pitches, or nominations, which will form the basis of shortlists that will be voted on in this year’s annual awards.

The European Central Bank is likely to lower the rate of covered bond purchases over the remainder of this year, according to analysts at Rabobank.

The Swedish issuer was lucky to raise €1bn of six year funding on Monday in the context of a weaker credit market, tight overall spreads and ultra-low yields. Bankers do not believe such execution would have been possible had the deal been postponed by even one day.

Bank of New Zealand (BNZ) issued its first covered bond in four years and enjoyed a solid reception. The bonds offered a double digit spread over the Australian parent and a fair pickup to where this week’s deal from Westpac New Zealand was indicated.

The European Commission’s impending proposal on the prudential treatment of sovereign bonds could boost the appeal of covered bonds, said Fitch in a report this week.

Strong demand helped two Dutch issuers bring €500m RMBS deals this week, with Obvion opting to boost the deal size of its market-first green RMBS after building a bumper order book dominated by dedicated green investors.

Fitch may assign a rating uplift to Italian SME covered bonds, or Titolo Obbligazionari Collateralizzati. The upbeat rating assessment follows a survey conducted by analysts at Société Générale which suggests more than 40% of covered bond investors would consider buying such deals.

Bank of New Zealand has mandated leads for the second Kiwi covered bond of the week. At the same time Suncorp Metway announced plans to issue an Australian dollar benchmark and UBI Banca has issued a tap.