Euro

Moody's recent negative rating action on Pfandbriefbank, Hypo Vorarlberg, Hypo Tirol and Hypo Noe has failed to have any impact on their covered bonds. After coming under severe pressure three weeks ago most Austrian covered bonds have rebounded beyond levels that were seen just before negative headlines first appeared. But Komunalbank’s euro deals have not and could still perform.

Sparkasse Koelnbonn is meeting investors from May 18 for what is becoming its annual €500m bond issue. While the deal will only go live subject to investor feedback and market conditions, bankers are expecting a five to seven year transaction the week after next.

Ålandsbanken is lining up to price a €250m covered bond and is meeting investors in Europe from May 5 – 12. This will be the Finnish bank’s largest covered bond to date.

The sharp rise in Bund yields has caused huge mark-to-market losses, effectively wiping out the lifetime coupon payments of any seven to 10 year fixed rate covered bonds bought in recent weeks. Markets appear to have temporarily stabilised, but underlying uncertainty may temper demand for fixed rate bonds suggesting the floating rate market could offer a better alternative.

Covered bond bankers and investors reacted with scepticism to the European Covered Bond Council (ECBC)’s proposed new dual-recourse bond structure. The lack of standardisation across SME reporting means that using them in the collateral pool will be problematic. In addition, even if these concerns are ironed out, issuers will have to pay up for the product, something which makes little sense in such a low cost environment.

Bankers are preparing the ground for the first Turkish covered bond with both Akbank and Garanti Bank preparing extensive investor roadshows. Batuhan Tufan, head of funding at Garanti Bank, told The Cover on Tuesday that he is confident supply will sell. However syndicate bankers question whether issuance will fit more closely with emerging market, or covered bond investor portfolios. In any case pricing is expected to be wide of the sovereign.

Bund yields, which have soared over the past week, began to stabilise on Tuesday, leading to optimism about the return of real money to the covered bond markets.

The relative value of covered bonds compared to sovereign bonds has improved, but the pace of European Central Bank buying has not slackened, as had been widely hoped. And even though the ECB has marginally scaled back primary market purchases this year compared to last, it remains an aggressive secondary market buyer.

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.