In-depth analysis and interviews

  • Bail-in confusion strangles senior, despite Swedbank’s success

    Swedbank priced the tightest fixed rate senior bond in several months this week, but bail-in uncertainty continues to undermine asset class. Bankers are split on whether issuers can be drawn away from covered bonds, which gave almost free funding for SEB Germany on Tuesday.

  • Covered bond market eager to see off ECB cuckoo

    The European Central Bank’s purchasing programme is having an unwelcome impact on covered bonds, but the market will remain an intrinsic component of bank financing, and will evolve with new products and structures.

Regulatory developments

  • South Africa considers covered bonds (again)

    The South African Reserve Bank (SARB) will consider the possibility of introducing a covered bond framework, something that it had vehemently rejected four years ago.

  • Riksbank worried about high house prices and debt

    The Swedish central bank published its second stability report of the year and continues to be concerned over high indebtedness and high house prices, factors which are intrinsically connected to the growth of Sweden’s covered bond market. The report follows recent proposals to tighten repo rules affecting covered bonds, proposals which the Swedish FSA and debt office have said are beyond the remit of the independent central bank.

  • ECB tightens covered bond repo rules

    The European Central Bank has announced changes to its collateral rules affecting the use of self- issued retained covered bonds. As a consequence, publicly syndicated issuance should become more attractive, which should lead to an increase covered bond supply, giving the ECB more material for its covered bond purchase programme (CBPP3).

  • UOB announces covered bond programme

    United Overseas Bank in Singapore came one step closer to issuing the country’s second covered bond on Monday when it published its offering circular. At the same time Moody’s published a presale report giving the deal a provisional Aaa rating.

Analyst research

  • Mooted law change is good for Pfandbrief

    The German government is considering new rules that would govern the regulation of loans for construction and residential properties. Though it is not clear whether the rules will become adopted, analysts at LBBW research say that if they are, they should lead to an improvement in the credit quality of Pfandbriefe.

  • Turkish banks face a marketing marathon

    Turkish covered bond issuers have a tough slog ahead if they want to sell covered bonds denominated in euros to the established European covered bond investor community, a recent survey conducted by Natixis research suggests.

  • Covered bond investor exodus to slow

    A far lower proportion of investors plan on reduce their covered bond portfolios next year compared to this year according to a survey conducted by Société Générale. Most of those asked expect the European Central Bank’s purchase programme (CBPP3) to be extended, and with spreads likely to remain tight, over half plan on moving down the capital structure.

Rating news

  • Covered bonds resilient to Singapore’s property price fall

    House prices have fallen in Singapore in the last two years, but covered bond ratings are highly resilient and have been stressed to price declines many times greater than the price falls seen, said Fitch. Bankers note that Singapore’s property price decline has been deliberately engineered and say it is one of the most regulated markets in the world.

  • Scope hands mass AAA-rating to Swedish market in bid for ECB backing

    Scope has assigned unsolicited AAA ratings with a stable outlook to 187 Swedish covered bonds with a total value of €130bn. Assigning the ratings could be an attempt to establish Scope’s credibility with the ECB which does not currently recognise the rating agency for repo purposes.

Deal reviews

  • BPIM and CM-CIC get over finishing line

    Crédit Mutuel-CIC (CM-CIC) and Banca Popolare di Milano (BPIM) issued 10 year covered bonds into relatively weak market conditions on Wednesday. Because of its larger size and tighter spread the French deal was probably the frailer of the two, and while both issuers met their funding targets in terms of size and spread, neither proved particularly popular.

  • SEB issues with smallest ever coupon

    SEB Germany’s three year public sector Pfandbrief issued on Tuesday offered the lowest ever yield for a primary covered bond. But some sort of positive return was absolutely necessary, even if it was as tiny as possible.

  • Aegon issues debut Dutch covered bond

    Aegon Bank was raised €750m for its debut covered bond. The five year conditional pass through (CPT) offered a fair pick-up to where Dutch national champions would have priced, and the level of other Dutch CPTs, and the issue drew a moderately oversubscribed book.

  • BayernLB enjoys strong support

    BayernLB issued a well oversubscribed Pfandbrief on Tuesday and priced somewhat tighter, and with a longer maturity, than other recently issued German covered bonds. The pricing showed that German investors can still just about demonstrate differentiation between credits, despite low yields and tight spreads across the board.

Mandates & deal pipeline

  • DBS Bank to be the first Asian issuer of sterling covered bond

    Development Bank of Singapore has announced that it will go on the road to market a sterling-denominated covered bond. The bank would be the first Asian issuer to sell a deal of this kind.

  • New Finnish issuer on the way

    Aktia Bank has agreed to buy the remainder of its subsidiary, Aktia Real Estate Mortgage Bank (Aktia REMB), by 2017. As a result Finland’s savings banks will refinance their own mortgages by establishing a new covered bond issuing institution, expected to be called SP Mortgage Bank, which will start issuing from next year.

  • Hypo Tirol looking to cement return of Austrian issuers

    September was a good month for Austrian issuers, with Erste Bank, UniCredit and Bawag all issuing benchmark size deals after a six month absence for Austrian issuers. Hypo Tirol are ready to join them, but question marks remain on how conducive the market is for new bonds.

Market wrap

  • Strong conditions but care still needed

    Though market conditions are strong and this week’s supply was easily digested, issuers cannot take anything for granted, as Friday’s public sector deal from Deutsche Pfandbriefbank (PBB) showed. Activity is expected to slow a little next week and the week after, before the market closes for the year.

People moves

Secondary market

  • Real money gingerly returns as RV improves

    The secondary market has been busier this week, with real money investors taking advantage of a cheapening in covered bonds relative to government bonds. With the ECB likely to step up purchases in the secondary market and government bonds, the outlook for the remainder of the year should be broadly supportive.

RMBS primary news

  • TSB tests waters with Duncan debut

    TSB's UK prime RMBS programme made a solid start on Wednesday afternoon, as the bank placed a debut £537m-equivalent deal in sterling and euros. The issuer retained over two thirds of the sterling tranche despite offering a decent spread pick-up, but the euro tranche priced strongly.


  • Senior unsecured should widen to covered bonds

    Banks may have become safer places to invest, but investors in senior unsecured bank debt have been shunted down capital structure. Senior spreads do not reflect this new credit risk, especially compared with covered bonds not eligible for the covered bond purchase programme (CBPP3).

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Book runner

Covered bonds €500m+ YTD to Oct 29  2015

Lead manager Amount
No of Issues Share %
1 Natixis 10.54 65 8.4
2 Commerzbank 7.81 52 6.2
3 BNP Paribas 7.28 33 5.8
4 Credit Agricole 6.60 41 5.3

 league table builder

All covered bonds YTD to Oct 29 2015

Lead manager Amount
No of Issues Share %
1 Natixis 12.64 70 6.2
2 HSBC 12.05 59 5.9
3 UBS 11.15 65 5.5
4 Commerzbank 10.00 69 4.9

 league table builder