CBA sells first privately placed covered bond

CBA printed a Nkr1.875bn ($308.6m) 10 year covered bond via RBC Capital Markets on January 13. The note, which is backed by residential mortgages, pays a coupon of 5% and was priced at par.

Demand came from a reverse enquiry following CBA’s first public covered bond, a €1.5bn five year print, sold in the first week of 2012. The bank expects to sell more private covered bonds in 2012.

“We respond to investor demand — selling covered bonds adds another product to our offering in a different format that investors can buy us in,” said a member of the CBA funding team.

However, it was not clear how much of the bank’s 2012 funding will be through private covered bonds. “It’s really down to whether the investor wants to buy us in covered or senior — it’s hard to say as a percentage how much it will be,” added the funding official.

CBA’s note had the same tenor, coupon and issue price as a Nkr2bn mortgage-backed print from Australian compatriot ANZ Bank on January 6, for which RBC Capital Markets also acted as dealer.

National Australia Bank (NAB) also sold a mortgage-backed note on January 11. NAB’s print was a €200m 15 year deal via Citi, paying a coupon of 4.08% and priced at par.

The Australian Banking Act was altered in October to allow covered bond issuance. CBA had readied its covered bond documentation by November, but “conditions weren’t conducive to covered bond issuance and they remained so up until the end of last year”, said funding official.

Under the new rules, Australian banks can issue covered bonds backed by a range of assets, including commercial property mortgages and certificates of deposit. However, CBA’s programme has one covered pool, which holds residential mortgages only.