Euro

Peripheral covered bonds have performed well lately, especially relative to the long end of the French market where selective sellers were reported on Wednesday. But once the covered bond purchase programme (CBPP3) has finished, peripheral markets are likely to be the most vulnerable.

The Bank of Scotland has become the first bank to not get approval to switch some of its covered bonds from a hard to soft bullet repayment. Though it did get approval to switch the majority of deals to a soft bullet, the result suggests investors are finally starting to assert their rights.

At least three Turkish banks have set up covered bond programmes and could theoretically be ready to issue their first benchmarks this autumn. However, even if the political outlook improves, the cost of funding in dollars using established senior unsecured programmes may be difficult to beat.

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.