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Deal reviews

  • RBC reopens US dollar covered bond market

    After a long succession of euro issuance from Canadian banks, Royal Bank of Canada broke ranks and issued the first dollar covered bond of the year on Thursday, funding at levels close to what it could have achieved in euros. The $2bn deal is likely to have been closely watched by other global banks with an established presence in the US market, and suggests that further deals could follow.

  • Erste shrugs off RBI worries with stellar Pfandbrief

    Erste Bank’s first covered bond in three years issued on Thursday was nearly three times subscribed in less than an hour. The rollicking result showed it was unaffected by mounting concerns in the Austrian bank sector generally, and over its peer Raiffeisen Bank in particular.

Mandates & deal pipeline

  • Kookmin prepares for covered bond issuance

    Korea’s Kookmin Bank has issued a consent solicitation proposing to amend a negative pledge clause on three existing unsecured deals. The move signals that the firm is preparing for covered bond issuance.

Opinion

  • Is Europe sleepwalking into the next crisis?

    Lulled into a false sense of security by the European Central Bank’s quantitative easing programme, investors seem to think they are immune from events in Greece. It’s certainly true that markets are in much better shape than they were when the country was first bailed out in 2010. Investors in AIB Mortgage Bank’s latest deal would probably vouch for that.

  • ECB must slow CBPP3 buying, or risk market’s long term health

    Faced with shrinking yields, covered bond investors have been deserting the market. Unless the ECB moves out of the way and switches to sovereign purchases fast, there is a real risk that these buyers will not be there when the extraordinary stimulus measures now being delivered are taken away.

Regulatory developments

  • EC consults on Capital Markets Union

    The European Commission is set to commence a consultation towards setting up a Capital Markets Union by 2019. The European Covered Bond Council (ECBC) plans a panel discussion on the topic in Brussels in February shortly after the official release of a “Green paper,” a copy of which was leaked to the press earlier this week. A second consultation, specifically alluding to the role of covered bonds is expected in June.

  • MAS to amend covered bond law, delaying issuance

    The Monetary Authority of Singapore has published a consultation paper proposing to amend the covered bond law. The announcement suggests the timetable for Singaporean covered bond issuance will be pushed back.

Secondary market

  • Core covered hold, but less certain in the periphery

    Core covered bond markets are well supported and, with Bund yields tumbling, they now offer exceptional value to established triple A investors, said dealers on Thursday. Though peripheral covered bonds have so far held in, uncertainty is greater and sentiment is more mixed.

  • Jury out on prospective CBPP3 purchasing rate

    Last week the ECB doubled its weekly covered bond purchasing rate to over €4bn, in line with the surge in primary issuance. Most analysts think the ECB will moderate the rate of covered bond purchases from March, when it will be able expand its balance sheet more rapidly with sovereign purchases, but not everyone is in agreement.

Rating news

  • Covered bonds face greatest risk in the medium term

    A majority of covered bond investors polled by Fitch in December 2014 say the market’s greatest challenge is decreasing secondary market liquidity. The rating agency expects the most pronounced illiquidity from June 2016, which could feed through to the credit quality of covered bond programmes, as refinancing becomes more difficult.

  • Peripheral upgrades unlikely to improve LCR demand

    Moody’s upgraded 12 Italian and Spanish covered bonds into “Aa” territory after the close on Wednesday, taking the bonds from category 2A to 1B in the liquidity coverage ratio (LCR). Though this should theoretically improve bank demand, last week’s LCR impact study published by the European Banking Authority (EBA) showed most banks had already met their minimum LCR requirement, suggesting scope for an improvement in appetite will be limited.

Market wrap

  • Covered bonds on hold, as Greece takes centre stage

    The covered bond market was on hold on Monday, awaiting developments in Greece after the anti-austerity party, Syriza, won a near majority in Sunday’s elections. Though the result was in line with expectations, the market is sensitive to the risk of negative headlines. One or two deals could emerge this week, but there is unlikely to be much until next week, when many issuers emerge from blackout.

Analyst research

  • Covered bonds are ripe for expansion says European Parliament

    A paper released by the European Parliament this month promotes the idea that the covered bond market is ripe for expansion. At the same time, BBVA research has published a report suggesting the possibility that dual recourse instruments could be backed by infrastructure project loans, cash flows derived from Spanish electricity tariff deficits, or even be utilised for contingent capital purposes.

In-depth analysis and interviews

  • Covered bond teams prepare for tricky 2015

    Several high level departures were seen in the covered bond market in 2014 as banks, grappling with the tough market environment, consolidated and focussed on 2015. Though covered bonds are set to remain the regulator’s friend, supply has fallen and this has hit fee income. Despite these headwinds, banks that are in poll position have maintained competency across the value chain, writes Bill Thornhill.

  • Covered bonds back where they belong, but LCR impact in doubt

    Covered bonds were always likely to be eligible assets for Basel III’s Liquidity Coverage Ratio, but when the final wording appeared it turned out to be much better than expected for the product. The long term implications are positive for the asset class, but a near term surge in demand is unlikely, writes Bill Thornhill.

  • The best hope for covered bonds in 2015

    The third covered bond purchase programme will not expand the European Central Bank’s (ECB) balance sheet to the extent needed because the market is too small. And spread tightening will not encourage greater issuance, as the ECB expects. The best hope for covered bonds in 2015 is for the ECB to give up on CBPP3 and turn its attention to the sovereign market where it has a much better chance of success.

People moves

Deals tracker

Priced Deals

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Book runner

Covered bonds €500m+ 12-mos rolling to Jan 01  2015


Lead manager Amount
€(bn)
No of Issues Share %
1 Natixis 9.06 45 8.0
2 BNP Paribas 8.57 39 7.6
3 Barclays 8.05 35 7.1
4 UniCredit 7.40 47 6.6


 league table builder

All covered bonds 12-mos rolling to Jan 06 2015


Lead manager Amount
$(bn)
No of Issues Share %
1 Natixis 15.01 56 7.0
2 BNP Paribas 13.91 50 6.5
3 Barclays 12.71 45 6.0
4 UniCredit 12.22 95 5.7

 league table builder