Euro

Banca Carige has appointed leads for a roadshow to market a prospective covered bond deal that does not currently have an investment grade rating from Moody’s.

SCBC returned to the covered bond market on Monday, following Swedbank, which priced a larger deal at a tighter spread in the same tenor last week. The difference in fortunes is simply a function of the market conditions, which were not good last week, but have deteriorated further. Separately, DVB bank is set to price a €250m shipping loan Pfandbrief.

Commonwealth Bank of Australia (CBA) has become the latest bank to get the consent of investors to switch a number of deals from a hard to soft bullet maturity. The probability of a soft bullet extension being triggered should be materially lower from January 2016 when bail-in legislation takes effect, and since soft bullet bonds require a less onerous collateral commitment from issuers, many borrowers should follow suit.

The Swedish Covered Bond Association (ASCB) says its government has proposed legislation that would require local covered bond issuers to hold a minimum 2% overcollateralization (OC). The move is designed to the exempt covered bonds from certain regulations that would otherwise have prevented banks from using derivatives in their cover pools.

HVB, the German subsidiary of UniCredit, returned to the covered bond market for the third time this year to issue a €500m five year mortgage backed Pfandbrief which, despite offering a double digit new issue premium, was only slightly oversubscribed.

Investors, including the ECB, flocked to ING Belgium’s €1bn six year covered bond on Thursday illustrating that, for the right name and spread, demand can be counted upon. Rival bankers heaped plaudits on the deal given the state of the market, which they described as ‘ugly’.

The European Central Bank has scope to lower covered bond purchases and still hit its overall buying target said analysts at Barclays. Last week, the ECB bought less in the secondary market but made up the shortfall with increased buying in the primary market.

The German based rating agency, Scope, has assigned triple-A ratings to 340 European covered bonds. However from a regulatory standpoint the ratings are equivalent to Single A at the other main agencies, said analysts at Commerzbank.

The European Central Bank's covered bond purchase programme is once again regularly taking half or more of primary issuance, with negative repercussions. It should step back.

Banco Popular Español (BPE) returned to the covered bond market for the third time this year to issue a six year deal on Wednesday. After the relatively weak reception Caja Rural de Castilla-La Mancha (CRCLM) received for its similar six year on Tuesday, BPE did well to raise €750m.

Deals issued on Tuesday from Westpac New Zealand and Spain's CRCLM failed to gain much traction despite attractive pricing. Another from Bawag, its first in three years was more comfortably oversubscribed.

Swedbank defied a tricky market on Tuesday to raise €1.25bn in five year covered bonds, in a deal described by a rival banker as “outstanding”.