Euro

Westpac has returned to the euro covered bond market for the first time since last July, mandating leads for another seven year. It follows trades from BNP Paribas and HSBC where demand was fuelled by central bank statements, that bankers said had exacerbated a short squeeze, causing investors to give up new issue premiums to get current coupon exposure.

Bayerische Landesbank sold a smoothly executed €500m 10 year transaction on Thursday, with cash rich investors willing to compromise on tight spreads and low coupons. But peripheral issuers could soon offer them juicer yields, said bankers.

Münchener Hypothekenbank (MuHyp) closed another successful euro benchmark this week and could visit the dollar market later in the year. But it also has its sights on the sterling market, where investors have become increasingly receptive to the tight spreads German borrowers offer.

Germany’s Münchener Hypothekenbank received €900m in orders for an eight year mortgage Pfandbrief on Wednesday, despite pricing it tighter than the Austrian sovereign’s 10 year issue on the same day.

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?