Covered Bonds - All Articles

  • Is Europe sleepwalking into the next crisis?

    Lulled into a false sense of security by the European Central Bank’s quantitative easing programme, investors seem to think they are immune from events in Greece. It’s certainly true that markets are in much better shape than they were when the country was first bailed out in 2010. Investors in AIB Mortgage Bank’s latest deal would probably vouch for that.

    • 30 Jan 2015
  • RBC reopens US dollar covered bond market

    After a long succession of euro issuance from Canadian banks, Royal Bank of Canada broke ranks and issued the first dollar covered bond of the year on Thursday, funding at levels close to what it could have achieved in euros. The $2bn deal is likely to have been closely watched by other global banks with an established presence in the US market, and suggests that further deals could follow.

    • 30 Jan 2015
  • EC consults on Capital Markets Union

    The European Commission is set to commence a consultation towards setting up a Capital Markets Union by 2019. The European Covered Bond Council (ECBC) plans a panel discussion on the topic in Brussels in February shortly after the official release of a “Green paper,” a copy of which was leaked to the press earlier this week. A second consultation, specifically alluding to the role of covered bonds is expected in June.

    • 30 Jan 2015
  • Kookmin prepares for covered bond issuance

    Korea’s Kookmin Bank has issued a consent solicitation proposing to amend a negative pledge clause on three existing unsecured deals. The move signals that the firm is preparing for covered bond issuance.

    • 30 Jan 2015
  • MAS to amend covered bond law, delaying issuance

    The Monetary Authority of Singapore has published a consultation paper proposing to amend the covered bond law. The announcement suggests the timetable for Singaporean covered bond issuance will be pushed back.

    • 30 Jan 2015
  • Is Europe sleepwalking into the next crisis?

    Lulled into a false sense of security by the European Central Bank’s quantitative easing programme, investors seem to think they are immune from events in Greece. It’s certainly true that markets are in much better shape than they were when the country was first bailed out in 2010. Investors in AIB Mortgage Bank’s latest deal would probably vouch for that.

    • 29 Jan 2015
  • Core covered hold, but less certain in the periphery

    Core covered bond markets are well supported and, with Bund yields tumbling, they now offer exceptional value to established triple A investors, said dealers on Thursday. Though peripheral covered bonds have so far held in, uncertainty is greater and sentiment is more mixed.

    • 29 Jan 2015
  • Erste shrugs off RBI worries with stellar Pfandbrief

    Erste Bank’s first covered bond in three years issued on Thursday was nearly three times subscribed in less than an hour. The rollicking result showed it was unaffected by mounting concerns in the Austrian bank sector generally, and over its peer Raiffeisen Bank in particular.

    • 29 Jan 2015
  • US to review prospects for covered bonds

    The US Financial Services Committee has published a document which suggests policy makers will once again take a look at the potential for a US covered bond legal framework.

    • 28 Jan 2015
  • ECB must slow covered bond purchases or risk the market’s longer term damage

    Faced with shrinking yields, covered bond investors have been deserting the market. Unless the ECB moves out of the way and switches to sovereign purchases fast, there is a real risk that these buyers will not be there when the extraordinary stimulus measures now being delivered are taken away.

    • 27 Jan 2015
  • Brazil 1: Chile 0

    Brazil’s primary covered bond legal framework was transformed into law on January 19. It could could achieve what the Chilean mortgage bond framework has been unable to do, said Fitch in a special report on the Brazilian covered bond law published on Monday. The law should enable substantial protection for covered bond investors, though much will depend on the more detailed secondary legislation - where work has only just begun.

    • 27 Jan 2015
  • AIB and Bankinter show periphery immune to Greek woes

    After pulling a 10 year deal last year, AIB Mortgage Bank returned to the market on Tuesday to price a very successful seven year. At the same time its Spanish peer, Bankinter, chose to issue in the same 10 year maturity that foiled AIB last year. Both banks achieved a solid result suggesting better quality peripheral covered bond issuers have not been affected by events in Greece.

    • 27 Jan 2015
  • ECB must slow CBPP3 buying, or risk market’s long term health

    Faced with shrinking yields, covered bond investors have been deserting the market. Unless the ECB moves out of the way and switches to sovereign purchases fast, there is a real risk that these buyers will not be there when the extraordinary stimulus measures now being delivered are taken away.

    • 27 Jan 2015
  • Jury out on prospective CBPP3 purchasing rate

    Last week the ECB doubled its weekly covered bond purchasing rate to over €4bn, in line with the surge in primary issuance. Most analysts think the ECB will moderate the rate of covered bond purchases from March, when it will be able expand its balance sheet more rapidly with sovereign purchases, but not everyone is in agreement.

    • 27 Jan 2015
  • Covered bonds on hold, as Greece takes centre stage

    The covered bond market was on hold on Monday, awaiting developments in Greece after the anti-austerity party, Syriza, won a near majority in Sunday’s elections. Though the result was in line with expectations, the market is sensitive to the risk of negative headlines. One or two deals could emerge this week, but there is unlikely to be much until next week, when many issuers emerge from blackout.

    • 26 Jan 2015
  • Covered bonds face greatest risk in the medium term

    A majority of covered bond investors polled by Fitch in December 2014 say the market’s greatest challenge is decreasing secondary market liquidity. The rating agency expects the most pronounced illiquidity from June 2016, which could feed through to the credit quality of covered bond programmes, as refinancing becomes more difficult.

    • 26 Jan 2015
  • Covered bond volumes triple as bull flattening gets underway

    The larger than expected quantitative easing programme announced by the European Central Bank on Thursday has turbo-charged the well-established bull flattening trend in covered bonds and trading volumes have tripled from earlier in the week. With the long end of French market now offering a tempting spread to OATs, real money buyers are set to return. And with Bonos and BTPs rallying hard, relative value between covered bonds and sovereigns should soon be restored in the Cédulas and Obbligazioni Bancarie Garantite markets.

    • 23 Jan 2015
  • NordLB Lux and Goldman set to expand dual recourse universe

    NordLB will start engaging with investors from mid-February regarding plans to sell its Lettre de Gage Publique. The issuer may also update investors about its merger plans, which could ultimately result in a wider pool of assets being financed under the Luxembourg covered bond law. Around the same time Goldman Sachs is likely to be reconsidering how to approach the market with its FIGSCO deal. The two issuers’ very different approaches show there is still great scope for innovation in dual recourse instruments.

    • 23 Jan 2015
  • Covered bond issuers rush to price before the ECB

    Five covered bond borrowers issued benchmark deals in the first half of this week, fearing potential volatility from Thursday's European Central Bank announcement on its sovereign quantitative easing programme.

    • 22 Jan 2015
  • NordLB to revive Lettre de Gage with first benchmark

    NordLB Covered Finance Bank (NORD/LB CFB) is set to revive the sedentary Lettre de Gage (LdG) market and plans to issue its first benchmark sized covered bond. The issuer, which will take advantage of the recently updated Luxembourg legal framework, mandated leads for a European roadshow on Tuesday.

    • 22 Jan 2015
  • Peripheral upgrades unlikely to improve LCR demand

    Moody’s upgraded 12 Italian and Spanish covered bonds into “Aa” territory after the close on Wednesday, taking the bonds from category 2A to 1B in the liquidity coverage ratio (LCR). Though this should theoretically improve bank demand, last week’s LCR impact study published by the European Banking Authority (EBA) showed most banks had already met their minimum LCR requirement, suggesting scope for an improvement in appetite will be limited.

    • 22 Jan 2015
  • Large scale QE is good for covered bonds

    If Wednesday’s leaks prove true, and the Eurosystem buys €50bn of sovereign bonds per month from March 2015 to December 2016, the total €1.1tr package is larger than expected. Government bonds should therefore outperform and this will restore relative value by making covered bonds look comparatively cheap, said analysts.

    • 22 Jan 2015
  • CIBC pays no new issue concession

    Canadian Imperial Bank of Commerce opened books for the third Canadian benchmark issued in euros this year. The transaction priced tighter than its peers with no new issue premium, though it was still comfortably oversubscribed. The strong result suggests potential for spread narrowing between eurozone and non-eurozone covered bonds.

    • 21 Jan 2015
  • NordLB mandates for maiden Lettre de Gage benchmark

    NordLB Covered Finance Bank (NORD/LB CFB) has mandated leads for a European roadshow to sell its first benchmark sized covered bond under the recently amended Luxembourg legal framework. Though this deal will be backed by public sector assets, the law allows for a much wider pool of movable assets, suggesting there is potential for more innovative deals to follow.

    • 21 Jan 2015
  • When regulators try to do credit analysis

    The European Commission wants credit ratings left out of financial regulation — a great move, if it can find something good to replace them. But it’s making the right decision for the wrong reason. Upset at the presence of sovereign rating caps the EC has thrown a hissy fit in its final version of the Liquidity Coverage Ratio, and suggests that jurisdiction should not be a part of the credit quality of covered bonds — a view that will come as a big surprise to anyone investing in them.

    • 21 Jan 2015
  • When regulators try to do credit analysis

    The European Commission wants credit ratings left out of financial regulation — a great move, if it can find something good to replace them. But it’s making the right decision for the wrong reason.

    • 20 Jan 2015
  • CGD gets longest and cheapest post crisis Portuguese funding

    Portugal’s Caixa Geral de Depósitos (CGD) issued a €1bn seven year covered bond, the longest seen from any Portuguese issuer in four years. And at 1% it was also the lowest coupon ever paid by a Portuguese covered bond issuer. The comfortably oversubscribed deal offered a new issue premium of 3bp to 4bp. However, rival bankers said the spread looked unattractive relative to government bonds which are should benefit from prospective central bank buying.

    • 20 Jan 2015
  • BMO becomes third Canadian covered sterling issuer

    After raising €1.5bn of five year funding last week, Bank of Montreal returned to the covered bond market on Tuesday to issue a sterling three year floater, the third in this format from a Canadian bank so far this year.

    • 20 Jan 2015
  • LCR to become binding as deletion of ratings to follow

    On January 17 the European Commission published a delegated regulation on the liquidity coverage ratio (LCR) in the “Official Journal of the European Union,” and the rules will become binding by October 2015. In December 2015, a further report will set out alternatives to credit ratings with the aim of deleting any reference to them in the LCR in five years. The European Covered Bond Council’s (ECBC) Label initiative could help but may need to be strengthened.

    • 19 Jan 2015
  • Austrian covered bonds hit after SNB’s move

    The Swiss National Bank’s decision to dispense with the currency peg between the Swiss franc and euro is credit negative for Austrian covered bonds, said Moody’s on Monday. The agency identifies the pools of UniCredit Bank Austria, Vorarlberger Landes-und Hypothekenbank and Hypo Alpe Adria Bank as having the greatest exposure to Swiss franc assets.

    • 19 Jan 2015
  • Commerzbank and NBC deal as order momentum slows

    Investors showed continued appetite for seven year paper, as Commerzbank and National Bank of Canada issued benchmark covered bonds in that maturity on Monday. However, leads said momentum was slower to build than last week. At the same time Portugal’s Caixa Geral de Depositos mandated leads for a deal ahead of this weekend’s Greek elections.

    • 19 Jan 2015
  • Busy first half expected next week

    The euro covered bond market is expected to regain momentum on Monday, as several issuers are looking to price deals ahead of potential volatility following the European Central Bank meeting on Thursday, and Greek elections on the following weekend.

    • 16 Jan 2015
  • Covered bonds are ripe for expansion says European Parliament

    A paper released by the European Parliament this month promotes the idea that the covered bond market is ripe for expansion. At the same time, BBVA research has published a report suggesting the possibility that dual recourse instruments could be backed by infrastructure project loans, cash flows derived from Spanish electricity tariff deficits, or even be utilised for contingent capital purposes.

    • 16 Jan 2015
  • Covered bond issuers supply across the curve

    Covered bond issuers from outside the Eurozone launched deals this week denominated in sterling and Australian dollars. But a bigger proportion were from the Eurozone where borrowers launched deals in the single currency in maturities that ranged from four to 20 years. The transaction were priced generously and enjoyed a solid reception, with central banks taking a back seat.

    • 16 Jan 2015
  • Covered bonds get seven in the seven year

    The covered bond market enjoyed its busiest week in the last three years as 16 borrowers launched benchmarks with a nominal value of €13.5bn ($15.70bn) across a range of currencies and tenors. But investors clearly showed a preference for the seven year — of which there were seven deals, accounting for half of this week’s supply.

    • 16 Jan 2015
  • Covered bond issuers supply across the curve

    Covered bond issuers from outside the Eurozone launched deals this week denominated in sterling and Australian dollars. But a bigger proportion were from the Eurozone where borrowers launched deals in the single currency in maturities that ranged from four to 20 years. The transaction were priced generously and enjoyed a solid reception, with central banks taking a back seat.

    • 15 Jan 2015
  • Covered bonds get seven in the seven year

    The covered bond market enjoyed its busiest week in the last three years as 16 borrowers launched benchmarks with a nominal value of €13.5bn ($15.70bn) across a range of currencies and tenors. But investors clearly showed a preference for the seven year — of which there were seven deals, accounting for half of this week’s supply.

    • 15 Jan 2015
  • CRU and KBC take well-trodden seven year path

    The covered bond primary market maintained robust momentum on Thursday as another four issuers priced deals. The seven year tenor remains the firm favourite with two new trades on Thursday taking the total to eight this year.

    • 15 Jan 2015
  • BMO and Cafill cover 2015’s maturity range

    Bank of Montreal (BMO) and Caisse Française de Financement Local (Caffil) respectively issued one of the shortest and longest covered bonds of 2015. BMO’s five year appealed to a wide audience enabling the borrower to issue a large €1.5bn deal. Though Caffil’s €500m 20 year appealed to a smaller audience, the very high quality investor base it appeals to bodes well for the deal’s long term performance.

    • 15 Jan 2015
  • Sekerbank markets first public euro SME covered bond

    Sekerbank is holding investor meetings for a covered bond which will be the bank’s first ever publicly syndicated deal targeted at investors in the private sector mainly in Europe. The deal takes advantage of the amended law which allows for greater use of derivatives in the cover pool.

    • 15 Jan 2015
  • CRU to set pulses racing

    Cajas Rurales Unidas is set to become the second Spanish issuer to launch a deal this week, having mandated leads for its third euro benchmark. The transaction is likely to offer the most attractive spread seen in covered bonds this year, and could reprice the issuer’s curve.

    • 14 Jan 2015
  • Intesa, ANZ NZ and DG go for sevens and sixes

    Primary momentum kept up pace in covered bonds on Wednesday. Intesa, DG Hyp and ANZ New Zealand joined the seven other borrowers that have already launched euro benchmarks so far this week. The issuers launched deals in the seven and six year area and all enjoyed a solid reception thanks partly to generous new issue premiums.

    • 14 Jan 2015
  • Investors drink on BPER, BOI, CM-CIC and WL Bank

    The European covered bond market kept up its momentum on Tuesday as four euro-denominated deals hit the screens and books were opened on another denominated in Australian dollars. The euro deals all offered a new issue concession of around 5bp and were comfortably oversubscribed.

    • 13 Jan 2015
  • Lloyds takes another £1bn off the table

    Lloyds has become the fourth issuer this year to fund in sterling covered bonds, a market that has so far provided €3.65bn equivalent, almost as much as has been issued in euro benchmark format this year.

    • 12 Jan 2015
  • BBVA triumphs with sevens as CFF and LBBW take the wings

    The European covered bond market got off to an exceptionally strong start on Monday as LBBW, Compagnie de Financement Foncier (CFF) and BBVA launched euro benchmarks across a range of maturities, without a hiccough. The strong start bodes well for Tuesday when several more euro benchmarks including Bank of Ireland and BPER are due.

    • 12 Jan 2015
  • Westpac enlivens covered bonds, but can it last?

    Westpac successfully priced the first euro-denominated covered bond of the year on Thursday amid hopes that it will set a positive tone for next week — which is expected to be the busiest of the year. But with confidence still lacking following a string of underperforming deals issued at end of last year, there is still some trepidation that the supply glut will cause a further re-pricing.

    • 09 Jan 2015
  • Covered bond teams prepare for tricky 2015

    Several high level departures were seen in the covered bond market in 2014 as banks, grappling with the tough market environment, consolidated and focussed on 2015. Though covered bonds are set to remain the regulator’s friend, supply has fallen and this has hit fee income. Despite these headwinds, banks that are in poll position have maintained competency across the value chain, writes Bill Thornhill.

    • 09 Jan 2015
  • Liquid covered bonds fail ESMA's test

    Covered bonds above a size of €750m are considered liquid according to the European Securities and Markets Association (ESMA) but nearly three quarters do not meet the regulator’s own liquidity test which takes into account the frequency and volume of trades.

    • 09 Jan 2015
  • Westpac enlivens covered bonds, but can it last?

    Westpac successfully priced the first euro-denominated covered bond of the year on Thursday amid hopes that it will set a positive tone for next week — which is expected to be the busiest of the year. But with confidence still lacking following a string of underperforming deals issued at end of last year, there is still some trepidation that the supply glut will cause a further re-pricing.

    • 08 Jan 2015
  • Barclays, BNS and CIBC get sterling covered

    Barclays Bank re-opened the primary covered bond market on Monday by issuing a £1bn ($1.51bn) three year sterling benchmark, and was followed by a pair of Canadian borrowers.

    • 08 Jan 2015
  • Covered bonds back where they belong, but LCR impact in doubt

    Covered bonds were always likely to be eligible assets for Basel III’s Liquidity Coverage Ratio, but when the final wording appeared it turned out to be much better than expected for the product. The long term implications are positive for the asset class, but a near term surge in demand is unlikely, writes Bill Thornhill.

    • 08 Jan 2015
  • BNS set to issue first Kangaroo covered bond of 2015

    Bank of Nova Scotia has returned to the covered bond market for a second time this week, mandating leads for the first Australian dollar covered bond deal of the year.

    • 08 Jan 2015
  • Upgrades in sight as Moody proposes new method

    Moody’s has asked the market to comment on a new proposal to change the anchor point for covered bond ratings from the issuer’s rating, to a new counterparty risk (CR) rating. The agency expects the proposal to have a net positive effect on covered bond ratings.

    • 08 Jan 2015
  • CMHC joins forces with covered bond Label advisory council

    The Covered Bond Label Foundation (CBLF) has appointed Wojciech Zielonka, senior vice President of the Canada Mortgage and Housing Corporation (CMHC), as the Canadian national representative on its advisory council.

    • 08 Jan 2015
  • Westpac invigorates euro covered bonds with positive start

    Westpac was set to price the first euro-denominated covered bond of the year on Thursday in a move that is likely breathe confidence into the market, following a disappointing end to 2014.

    • 08 Jan 2015
  • Soft bullet exchanges must be more open

    Credit Suisse has become the first Issuer to change the terms of its covered bonds from a hard to a soft bullet maturity — on existing deals. The move, which puts investors at a disadvantage, shows they cannot rely on original terms remaining in place through the life of a deal.

    • 07 Jan 2015
  • Dutch legal update will have limited impact

    An updated Dutch covered bond legal framework, which took effect on January 1 this year, brings the law into line with the European Banking Authority’s (EBA) best practice guidelines and European regulations. But, since most issuers already comply with the amendments, the impact is likely to be limited, said analysts from Société Générale’s research team.

    • 07 Jan 2015
  • ECBC argues against hard encumbrance limits

    A large part of a bank’s asset encumbrance is hard to measure and this may lead regulators to focus on one of the most visible and transparent components of encumbrance: covered bonds, according to a paper from the European Covered Bond Council published on Wednesday. The trade association urged European policy makers to take a holistic approach to assessing encumbrance and said a hard encumbrance cap should be avoided.

    • 07 Jan 2015
  • CIBC issued first sterling benchmark

    Canadian Imperial Bank of Commerce (CIBC) became the third issuer to price a sterling-denominated floating rate covered bond this week, launching its inaugural transaction in the UK currency on Wednesday. The Canadian issuer matched the spread achieved by Barclays, which priced a deal on Monday, and in greater size and with a slightly longer duration than Scotiabank, which tapped a deal on Tuesday.

    • 07 Jan 2015
  • Soft bullet exchanges must be more open

    On December 30, when most investors were on holiday, Credit Suisse changed the terms of its existing covered bonds from a hard to a soft bullet maturity with the approval of just a few investors. Other issuers looking to change the terms of existing deals should be more upfront about liability management exercises that could put investors at a disadvantage.

    • 06 Jan 2015
  • Scotiabank follows Barclays in sterling covered

    Scotiabank has tapped its three year sterling FRN for £300m, a day after Barclays issued a £1bn deal in the same maturity. A euro deal could be announced shortly, but bankers warn that the size of the new issue premium needed in euros will present a quandary.

    • 06 Jan 2015
  • The best hope for covered bonds in 2015

    The third covered bond purchase programme will not expand the European Central Bank’s (ECB) balance sheet to the extent needed because the market is too small. And spread tightening will not encourage greater issuance, as the ECB expects. The best hope for covered bonds in 2015 is for the ECB to give up on CBPP3 and turn its attention to the sovereign market where it has a much better chance of success.

    • 06 Jan 2015
  • Sovereign QE is good for covered bonds, says Barclays

    The eurosystem is expected to become a less aggressive buyer of covered bonds if sovereign quantitative easing is announced, according to analysts at Barclays’ research. They recommend investors switch out of peripheral covered bonds into government bonds in the next few weeks.

    • 06 Jan 2015
  • Barclays issues first covered bond of 2015

    The primary covered bond market was re-opened by Barclays Bank, which issued a £1bn three year sterling deal on Monday. Order book momentum was slow to build reflecting an underlying uncertainty about the near term spread outlook and the size of new issue premiums that will be required next week when the more important euro market is expected to open.

    • 05 Jan 2015
  • NBC mandates for roadshow

    National Bank of Canada has mandated leads for a roadshow starting next week.

    • 05 Jan 2015
  • CS gets soft bullet consent second time round

    Credit Suisse finally received investors consent to change the maturity of a number of deals from hard to soft bullet maturities at a second vote held on December 30, 2014.

    • 05 Jan 2015