UK

News earlier this week that the German regulator, Bafin, had sent out a draft letter regarding the treatment of structured covered bonds, has added to concerns that certain structures may see renewed selling pressure. But for some investors this may herald an investment opportunity.

Nationwide building society has amended its Eu45bn euro covered bond programme to allow the issuance of Namensschuldverschreibung, registered bonds issued under German law.

Lloyds TSB today priced a Eu750m 12-year UK covered bond as much as 10bp outside initial guidance at mid swaps plus 150bp –yielding a juicy 4.875%, via joint leads Lloyds TSB, Natixis, UBS and UniCredit.

Royal Bank of Scotland launched a Eu1bn seven year transaction that leads BNP Paribas, ING, RBS and UBS priced at 125bp, the middle of guidance.

The covered bond market has experienced its busiest ever week with as many as 15 deals pricing, giving a grand total of about Eu19bn over the holiday shortened week.

Barclays Bank yesterday (Wednesday) priced a Eu1bn 10-year via joint leads Barclays Capital, Commerzebank, Danske, Lloyds TSB, Natixis and Santander. Books opened at 10am on Wednesday before closing just three and a half hours later with an oversubscription of 1.3 times.

The iTraxx senior financials is trading wider ahead of the release of the EC’s latest draft consultation paper, which is likely to confirm suspicions that an EU wide initiative on bank bail-ins is going to be hard-coded into regulation.

Primary issuance continues to power ahead with five deals pricing yesterday and a further five deals expected to price this afternoon. Several more have been announced but, in a possible sign of things to come, two have been postponed and there is speculation that another is struggling.

The Bank of Scotland, a subsidiary of the Lloyds Group, has restructured as many as eight covered bonds in an exercise that could be constituted as a preliminary move ahead of potentially issuing into the public market.

Benchmark covered bond supply in 2011 is likely to be close to 2010 volumes, according to covered bond analysts, with no analysis forecasting more than a Eu20bn rise or fall relative to 2010 levels.

The UK Regulated Covered Bond Council has appointed Chris Fielding to a newly created role of chief industry spokesperson for the council as part of a push to promote UK Regulated Covered Bonds, it announced today (Tuesday).

Following a premature halt to new issuance this year, syndicate bankers expect the onset of 2011 to bring a rush of benchmark covered bond supply as issuers hasten to execute funding plans in anticipation of continued market volatility. A liquid buy-side should ensure that deals are readily absorbed - at least initially.