Euro

Covered bonds will help Virgin Money achieve its stated aim of optimising funding costs and extending tenor, especially when taking account of its latest Gosforth RMBS, which gave funding that was both short and more costly compared to covered bonds.

The Italian parliament approved a new law earlier this month that is expected to help finance a broad range of assets. Investors of the secured bonds have recourse to the underlying asset pool as well as an unsecured claim against the issuer.

The soft bullet maturity extension currently being considered for introduction into Germany’s Pfandbriefe law would lower the chance of a payment interruption and could mean issuers need to set aside less collateral to achieve the same rating, said Fitch. Soft bullet bonds would also not be subordinate to hard.

Capital markets were roaring this week, but despite increasing signs of frothiness, the euphoria looks set to persist for some time longer.

Vakifbank will issue the first euro denominated mortgage backed Turkish covered bond next week, a deal other Turkish banks are set to follow. And being the first of its kind, it should send a strong signal to other borrowers in the emerging markets, such as Brazil. With market conditions set to stay strong and the search for yield undiminished, investors are likely to be receptive.

The German association of mortgage banks (VDP) has suggested a potential change in the Pfandbrief law that could result in a change in the maturity structure from hard to soft bullet.

HSH Nordbank found little difficulty finding demand for its €500m seven year issued on Wednesday, and despite its relatively low credit standing, international demand for the bonds was strikingly high.

The job of BNP Paribas’ covered bond research analyst, Heiko Langer, has been put at risk.

Toronto Dominion Bank attracted the highest oversubscription level of any Canadian deal issued in euros this year even though it was its fourth foray into the covered bond market in 2016.

Several covered bond issuers have removed the swaps in their covered bond programmes, in the face of onerous regulatory obligations. This has improved their funding efficiency and given investors a less risky, more transparent, and potentially higher yielding product. Others should follow.

Favourable funding conditions should pave the way for an increasing amount of Turkish mortgage backed covered bond supply over the next few months, said Moody’s. Covered bonds will reduce Turkish banks’ asset-liability funding mismatch and help diversify their funding, the agency said.

Bank of Nova Scotia (BNS) has mandated leads for the sixth dollar benchmark of the year and the third from a Canadian bank.