Euro

Czech Raiffeisenbank has mandated leads for the first publicly distributed euro-denominated benchmark Czech covered bond, which is expected to be launched following a roadshow. The transaction, which is eligible for repo with the European Central Bank and documented under English law, could be followed by a string of other Czech covered bond deals denominated in euros.

Sparkasse KölnBonn opened books on Tuesday on an Aaa-rated €500m no-grow 10 year mortgage backed Pfandbrief, its first deal since April 2013 and the sixth 10 year print to come out of Germany in 2014. Bankers on the deal said they could have pushed the rare name through mid-swaps but opted not to, as the issuer wanted to leave room for secondary market performance.

Canadian Imperial Bank of Commerce has mandated leads for its first euro benchmark covered bond of the year. With comparable deals trading through mid-swaps, the transaction has potential to price inside Euribor, even though its bonds are not eligible for the European central bank’s purchase programme.

The wave of spread compression triggered by Thursday’s CBPP3 announcement is driving covered bond funding costs towards the TLTRO level across the periphery, according to analysis by Crédit Agricole’s covered bond research team in a note published on Friday.

Belfius Bank was set to price its first public sector-backed Pandbrieven and the first under the Belgian covered bond law on Monday. Though larger than usual, the deal was comfortably oversubscribed and was expected to price with no new issue premium.

Sub-investment grade ABS and covered bonds will be on the European Central Bank’s shopping list when it begins the private sector purchase programme it hopes will revive real economy lending this month. But stakeholders in both markets remain unconvinced of the size the ECB can achieve and many now see the move as a mere stepping stone to full-blown quantitative easing.

Lars Overby, head of credit, market and operational risk policy unit at the European Banking Authority, in discussion with Bill Thornhill, editor of The Cover, about the challenges facing harmonisation of the asset class.

The European Central Bank’s purchases of ABS and covered bonds may start next month and last four years.

Harmonising covered bond standards tends to make eyes glaze over. The myriad of different regimes and labyrinth of technicalities involved can seem baffling and trivial. But it would be a mistake to believe the project is an open-ended soft option that will never really happen. Harmonisation will materialise and progress will be monitored, suggesting everyone needs to be up to speed.

Austrian lender Hypo Tyrol issued its first publicly distributed deal on Wednesday, pricing a sub benchmark sized €300m public sector Pfandbrief. The transaction’s smaller than usual size meant it was not eligible for the covered bond indices, which deterred large investors. However, investors were compensated for the less liquid size with a wider than usual spread.

Arnaud-Guilhem Lamy, a portfolio manager within the euro sovereign and aggregate fixed income team at BNP Paribas Investment Partners (AuM: €32.5bn), speaks to The Cover in a podcast interview about how he is adapting his investment strategy in response to the European Central Bank’s (ECB) third covered bond purchase programme (CBPP3).

Several covered bond issuers have been marketing deals and are ready to launch, but they are unlikely to press ahead until next week at the earliest. In the meantime, they will be closely watching markets on Thursday when the European Central Bank governor Mario Draghi is expected to reveal details of the third covered bond purchase programme (CBPP3).