Euro

Neil Sankoff, head of senior funding, in HSBC's global balance sheet management division, has spoken to The Cover about Tuesday’s €1.25bn 10.5 year Obligation à l'Habitat and the bank’s global funding strategy. With no formal marketing, the deal was all about timing, he said.

Persistent interest from domestic investors prompted HSH Nordbank to increase a recent €500m public sector backed bond by €250m.

Turkey’s covered bond market is set to break away from SME-only issuance into mortgage transactions. Garanti Bank is planning a mortgage backed covered bond and several other issuers are keen to use the asset class to fund mortgage lending, said bankers.

Germany’s Sparkasse KölnBonn is preparing to return to the covered bond market with its first benchmark transaction in five years.

Moody’s published a presale rating report for Vorarlberger Landes-und Hypothekenbank on Thursday ahead of a roadshow that is scheduled to take place next week. It suggests that the collateral is mediocre relative to its Austrian peers but research analysts point out that Hypo Vorarlberg has a solid business model and ownership structure.

Legal changes in Spain’s banking system are positive for covered bond holders and time subordination is no longer a factor in Cédulas recoveries, said Fitch in a report published on Friday.

Commerzbank’s recently issued SME structured covered bond has been elevated from liquidity category four to liquidity category three in the European Central Bank’s liquidity framework, thereby attracting a much lower haircut. The move should improve the attractiveness of the asset class and could help spur its development.

Covered bond ratings are going one way — down. Yet regulators continue to develop rules that would force investors to hold more capital against covered bonds rated AA- and below, and it is not yet clear whether covered will be classed as a top level asset for the Liquidity Coverage Ratio. Are regulators out of touch?

The primary market remained dormant today but there are high hopes that a Northern European deal will surface next week. And, despite the Stadshypotek experience, syndicate bankers believe that with careful execution borrowers could even fund without paying a new issue premium

Net euro denominated covered bond supply has dropped to the lowest level since the euro begun. And with a surfeit of central bank liquidity alongside continued balance sheet shrinkage, this trend looks set to continue, suggesting that the already measly supply forecasts for the year could be revised lower.

Standard & Poor’s brought a ray of sunshine to the world of Cédulas ratings this week, when it upgraded NCG Banco’s bonds because of improvement in the quality and maturity profile of the bank’s loan book.

Deutsche Pfandbriefbank (Pbb) launched a €100m three year floating rate Pfandbrief on Tuesday, but syndicate bankers are sceptical that the euro market will manage much more before Easter. The storm around Cyprus may have subsided, but it has reminded issuers how quickly markets can turn and highlighted the value of covered bond collateral.