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Contrasting investor receptions in euro and sterling markets but new issue premiums rise in both
Bankers predict steady flow of covered bonds issuance over coming weeks despite recent spike in activity
The conditions are in place for the return of big-ticket M&A to create a European banking champion that is sorely needed — provided the politics of it don’t get in the way
Data
Observers blame slower bookbuilding on deal-specific factors but others see warning shots for whole market
Covered market provides 'the deepest pocket of demand' among FIG asset classes
Capital deals and a tight Nordic senior print point to what lies ahead for issuers
The single currency stands out as the most attractive funding source while the US dollar market remains open in size
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Henrik Stille, senior portfolio manager at Nordea Asset Management, talked to GlobalCapital about the covered bond market and the incredible returns that his strategies have delivered this year, from traditional long-only solutions to innovative leveraged alternatives. -
Société Générale took advantage of superlative conditions in the US dollar market at the start of the week, raising $2bn of funding with a tightly priced deal in non-preferred senior format.
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Covered bond participants will be looking eagerly to the European Central Bank’s policy meeting this Thursday in anticipation of a host of new stimulus measures, the most important of which is likely to be the targeted long term refinancing operation, where lower rates for longer are expected to impinge on supply.
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Tight spreads, low yields and aggressive central bank action make covered bonds a 'low conviction' asset class, according to one major investor. But there is some scope for selective performance in relation to debut issuers and deals from Japan, where a legislative framework is hoped for.
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The FIG pipeline has slowed to a drip, with the upcoming ECB meeting and Brexit talks bookending what could be the last week of open windows for issuance.
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European banks will have longer than expected to correct the fallback language in their dollar-denominated additional tier ones (AT1s), now that dollar Libor has been given an extra 18 months to live.
Polls and awards
Cast your vote now to decide this year's covered bond award winners and express your views in our new market survey
Bond market's leading performers recognised at GlobalCapital's annual awards ceremony
The awards recognise the market's leading deals, issuers, banks and other participants
The winning institutions and individuals will be revealed at the awards dinner on June 17 in London
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