Euro

Moody’s said on Thursday that, should Greece leave the euro, investors in Greek covered bonds would still likely receive payments in euros. Given that there are barely any Greek covered bonds held by third party investors, and the fact that the research is predicated on Grexit, the discussion is largely theoretical.

A triumphant first Grüner Pfandbrief has snapped the covered bond market out of its recent decline, bringing new buyers to a product that many investors abandoned this year as the European Central Bank’s purchases crowded them out, writes Bill Thornhill.

Northern Rock Asset Management (NRAM) set the early redemption price for its €2bn 3.875% November 2020s. It is looking to buy back all the notes with a tender offer and consent solicitation and will hold a meeting next week.

Northern Rock Asset Management (NRAM) will repurchase its €2bn 3.875% November 2020s at 121.494.

The outlook for peripheral covered bonds is still positive, and despite the disappointing result achieved by Bank of Ireland on Wednesday, bankers expect further supply.

Bank of Ireland has priced the third covered bond from Ireland this year and, in contrast to BNP Paribas which issued a 10 year deal on Tuesday, it paid a decent 3bp-4bp new issue premium for the seven year offering. Despite that, it was the issuer's least subscribed deal since 2012.

The Spanish government has published a new securitization law which is expected to allow issuers to structure covered bonds backed by a segregated pool. The move could spur issuers to consider conditional pass through structures backed by a broad range of assets, said analysts at Moody’s and Société Générale.

Until recently, green covered bonds were always more of a theoretical discussion than one that had taken root. But on Monday, the asset class took a giant leap forward as Berlin Hyp issued its €500m seven year Grüner Pfandbrief, a transaction that was placed with many new types of investor. The deal could be just what the central bank-oppressed market needs.

BNP Paribas made an opportunistic move to price the first 10 year covered bond in over a month on Tuesday via an intraday execution. Strong demand and a book that was twice covered allowed the issuer to increase the size of the deal to €750m from €500m and enabling pricing almost flat to BNP Paribas’ existing curve.

The assets of distressed Austrian bank Oevag will be divided between a bad bank and Volksbank Wien-Baden. Unlike the case of Kommunalkredit however, all of the bank’s outstanding covered bonds will be transferred to Volksbank. Analysts say this indicates the Austrian regulator is returning to a more traditional and investor friendly method of bank splitting.

Berlin Hyp on Monday reaped the rewards of its extensive roadshow and attracted the highest oversubscription of any German covered bond issued this year at the tightest spread for the tenor. The astonishing result was achieved with the help of Green and SRI investors that bought 48% of deal. The transaction sends a strong signal to other covered bond borrowers that Green covered bonds diversify funding, suggesting they have a bright future.

UK covered bond programmes have the highest foreign exchange gap according to Moody’s. But the fact UK issuers have issued predominately issued in sterling this year shows they are attempting to reduce this exposure.