Deal reviews

  • TD squeezes between CBA and Nationwide

    Toronto Dominion returned to the euro covered bond market for the second time this year, pricing the third seven year from an issuer outside the eurozone this week. The spread TD achieved reflected the importance of regulatory treatment, since better treatment allowed Nationwide to price tighter, and worse treatment forced Commonwealth Bank of Australia to price wider.

  • Suncorp gives spread

    Suncorp-Metway has priced its first covered bond deal since November 2012. The two tranche fixed and floating rate Australian dollar transaction offered an attractive 12bp spread pick up to where the previous covered bond issued by Royal Bank of Canada had been trading.

  • Investors sensitive to Nationwide’s price

    Nationwide Building Society’s third covered bond of the year had to offer an attractive new issue premium because there was considerable price sensitivity in the book. The deal illustrates that, despite a technical undersupply of covered bonds, there is a greater balance between supply and demand than perceived, especially for bonds ineligible for the European Central Bank’s purchase programme.

  • CBA gets to single digits

    Commonwealth Bank of Australia (CBA) was set to price Australia’s first euro benchmark covered bond in single digit territory over mid-swaps on Tuesday. The deal, which was announced at short notice and which was slow to build early traction, nevertheless managed to attract new investors, though at 14%, bank demand was disappointing given the bonds are now eligible for their liquidity buffers.

Secondary market

  • Germany dominates start of covered bond buys

    Of the national central banks which are buying covered bonds as part of the ECB’s covered bond purchase programme, the Bundesbank has been the most active by a large margin, said two covered bond traders. It is said to have accounted for around a quarter of queries in the secondary market from Monday through to 12pm BST on Wednesday.

Rating news

  • S&P says Swedish mortgage plan is positive

    Standard & Poor’s has followed Moody’s in saying that a Swedish proposal to cap new interest only loans at 50% of a property’s value, rather than the 75% maximum in force today, is credit positive. This is because it will lead to a lower mismatch between an issuer’s assets and liabilities, the main source of rating volatility for Swedish issuers.

Mandates & deal pipeline

  • Suncorp comes back to covereds

    Suncorp-Metway has mandated leads for a five year Australian dollar covered bond, the third in the currency this year and the issuer’s first since November 2012. The deal is expected to be launched this week.

People moves

  • Scope scoops Fuchs

    Karlo Fuchs has been appointed as head of covered bonds with immediate effect at Scope Ratings. Fuchs joins from Standard & Poor’s where he had worked for 15 years as a senior director and head of covered bond analysis.

Market wrap

  • CBPP3 gets underway as AQR nerves mount

    The national central banks of France, Portugal and Spain were reported buying covered bonds issued by banks from their own jurisdictions on Monday, said dealers. The amounts were small and the purchases were price sensitive, they added. Offers in Banca Monte Paschi Siena’s covered bonds were unchanged as its shares came under pressure following reports it may need to raise €1.7bn in fresh capital.


  • ECB must buy covered bonds aggressively, or not at all

    The European Central Bank will face a dilemma when it embarks on its third covered bond purchase programme, which could start on Wednesday. Either the central bank buys covered bonds aggressively, something that it has vowed not to do, or it will fail to meet its own target for expanding its balance sheet.

Regulatory developments

  • LCR will not need minimum OC in national laws

    Covered bond overcollateralisation must be calculated on a legally defined methodology for covered bonds to qualify for inclusion in the liquidity coverage ratio, according to the European Covered Bond Council. But this does not necessarily mean a legal minimum OC level, which should avoid amendments to national covered bond laws.

  • Unrated covered bonds get into LCR

    The final text of the European Commission’s (EC) Delegated Act on the Liquidity Coverage Ratio (LCR) says that covered bonds that are not rated will be eligible for inclusion into category 2B. The announcement on Friday shows that the European Commission is keen to reduce reliance on credit ratings and should be another boon for the covered bond market.

Analyst research

  • Investors more positive than expected on CBPP3

    Around half of investors view CBPP3 as an overall positive, according to a Crédit Agricole survey of 89 investors published on Monday. Two thirds of investors expect the programme to have a crowding out effect on secondary markets.

  • Covered bonds to become cheaper than ECB for periphery banks

    The wave of spread compression triggered by Thursday’s CBPP3 announcement is driving covered bond funding costs towards the TLTRO level across the periphery, according to analysis by Crédit Agricole’s covered bond research team in a note published on Friday.

In-depth analysis and interviews

  • Podcast: Michel Noel on the global potential of covered bonds

    Michel Noel, practice manager for non-bank financial institutions in the finance and markets global practice at the World Bank speaks to The Cover in a podcast interview about how the development bank assisted Brazil’s Ministry of Finance in drafting its newly released covered bond law — and which countries could be next.

  • Brazilian primary legislation in place but secondary work will take time

    Brazilian covered bond deals will have to wait for further regulatory work to be done, despite the publication of the Brazilian covered bond law — or Letras Imobiliárias Garantidas (LIG) — on Wednesday.

  • The Vienna podcast series

    In Vienna The Cover spoke to three major covered bond investors, the EBA, IMF and head of treasury at a new jurisdiction bank about the state of our global market. We hope you enjoy listening:

  • Covered bond bankers respond to CBPP3

    Covered bond bankers spoke to The Cover in the immediate aftermath of the European Central Bank’s announcement of its third covered bond purchase programme. Though the programme is bullish for spreads, bankers said the ECB would struggle to expand its balance sheet.

  • Draghi reaches for junk but bankers unimpressed by size

    Sub-investment grade ABS and covered bonds will be on the European Central Bank’s shopping list when it begins the private sector purchase programme it hopes will revive real economy lending this month. But stakeholders in both markets remain unconvinced of the size the ECB can achieve and many now see the move as a mere stepping stone to full-blown quantitative easing.

RMBS primary news

  • RMBS supply picks up despite softer tone

    New issue momentum picked up in the RMBS market this week as one Dutch deal was priced and another was announced, along with a sterling deal from a UK bank. However, pricing softened as euphoria over the ECB’s purchase programme began to wane.

Deals tracker

Priced Deals

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Book runner

Covered bonds €500m+ to May 29  2014

Lead manager Amount
No of Issues Share %
1 BNP Paribas 4.51 20 8.5
2 UniCredit 4.38 29 8.2
3 Natixis 4.09 21 7.7
4 Commerzbank 3.38 21 6.3

 league table builder

All covered bonds to May 29 2014

Lead manager Amount
No of Issues Share %
1 UnCredit 7.60 51 7.9
2 Natixis 7.36 27 7.7
3 BNP Paribas 6.58 23 6.9
4 UBS 5.12 31 5.3

 league table builder