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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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The ease with which banks have been able to deploy retained covered bonds for repo funding with central banks has aggravated liquidity risks and undermined regulations that were designed to shore up liquidity management practices exposed as inadequate during the 2008 financial crisis. -
The Bank of Japan has said that it will pay extra on reserves deposited by banks that become more cost efficient or that merge. A similar policy could well be introduced in Europe too, although perhaps with different aims.
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De Volksbank mandated joint leads on Tuesday for a 20 year soft bullet covered bond, building on the earlier successes of two other issuers that recently responded to investor demand for yield with deals in this same maturity.
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Apart from the UK, very few covered bond issuers have provided details on the proportion of loans in their cover pools that have been affected by payment holidays. Though covered bonds offer strong investor protection these safeguards risk being eroded.
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Deal arrangers expect banks will take advantage of a positive tone in the euro market by bringing forward their plans for non-preferred senior issuance, following in the footsteps of CaixaBank and ING Groep on Tuesday.
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German insurer Allianz was met with a wall of demand for its debut restricted tier one (RT1) bond this week — a deal that could play an important role in the development of the asset class.
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Bond market's leading performers recognised at GlobalCapital's annual awards ceremony
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The winning institutions and individuals will be revealed at the awards dinner on June 17 in London
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