Euro

Overcollateralisation has a big influence on the ratings of covered bond but it is not a good guide to their resilience and rating stability, according to DZ Bank.

The secondary covered bond market was busy on Monday, with dealers reporting large trades in multi-Cédulas, which have held steady, and better buying of Italian covered bonds, which are tightening.

When is a covered bond not a covered bond? Commerzbank’s controversial SME structured deal generated much emotion at the IMN covered bond conference in London this week. In a show of hands, almost all delegates thought the issuer should not have been able to market it as a covered bond. The Cover looks into the reasons for their disapproval and considers the arguments for the defence. Whoever is right, Commerz has given the market a new headache.

Aareal Bank launched the third short dated floating rate Pfandbrief in the last week on Friday, after bank treasuries looking for safe haven paper approached the issuer. Several of Aareal’s peers are lining up longer dated benchmark deals, but a surge in Bund futures could put their plans on hold.

Bankia became the latest Spanish issuer to announce a covered bond buyback on Friday, and will take offers on several mortgage backed Cédulas over the next two weeks.

Bankia became the latest Spanish issuer to announce a covered bond buyback on Friday, and will take offers on several mortgage backed Cédulas over the next two weeks.

Aareal Bank launched the third short dated floating rate Pfandbrief in the last week on Friday, after bank treasuries looking for safe haven paper approached the issuer. Several of Aareal’s peers are lining up longer dated benchmark deals, but a surge in Bund futures could put their plans on hold.

Crédit Agricole braved an uncertain market on Thursday to launch its first Obligations à l’Habitat of the year. It was rewarded for its courage with the largest covered bond print in over a month and a final spread inside its secondary curve, proving the primary window remains wide open for core issuance.

Deutsche Pfandbriefbank tapped a recent floating rate mortgage backed covered bond for €150m on Wednesday, although fresh benchmark deals are unlikely in the wake of Italy’s election, said debt bankers. They fear the surge in volatility could close the issuance window for weeks. However, other bankers countered that strong core names would have no trouble bringing transactions.

Covered bond bankers are still hoping for deals this week, despite uncertainties over the quality of order books in recent deals. Meanwhile, the market is waiting for the Italian election results and watching for any delayed reaction to the UK’s rating downgrade.

After being absent from the euro covered bond market for nearly two years, Danske Bank made a surprise return on Thursday, mandating leads and opening books for a €1bn seven year deal priced at the tight end of guidance.

SEB was tempted into a surprise return to the euro covered bond market by the best relative funding levels versus its domestic market for some time, its head of treasury management told The Cover on Tuesday. John-Arne Wang said SEB saw a chance to grab tighter funding on Monday, thanks to a three week drought in the euro primary market.