Covered Bond & RMBS Comment – Reduced demand, but window still open

by: Joost Beaumont

  • Stadshypothek’s third deal of this year was met with reduced demand
  • Lines on issuer were probably already full, while deal size was larger
  • So, it seems too early to say that window to market has closed
  • Although issuance is likely to remain modest in run up to year-end
  • TSB Bank in market with 5y GBP floater
  • Some profit taking in Canadian and French paper
  • Belgian banks faced with slight increase in risk weights for mortgages
  • Alpha Bank can be third Greek bank to enter market (with soft bullet)

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Covered-Bond-RMBS-Comment-30-November.pdf (206 KB)

Stadshypothek’s third deal saw reduced demand

Stadshypothek sold its third euro benchmark covered bond of this year yesterday, while it was the issuer’s second 7y deal. Demand for the deal was sufficient to cover the deal, although the bid-to-cover ratio was the lowest of all three deals. Having said that, the issuer printed EUR 0.75bn yesterday, while the other two had both a size of EUR 0.5bn. Moreover, the fact that it was the bank’s third deal of 2017 might also have reduced investor appetite, with lines to the issuer probably already fully used. Therefore, we think it is too early to say that the window to the primary market has closed.


No deals have been announced so far today, so it seems that the SHBASS benchmark was the last of November. It brought this month’s total supply of euro benchmark covered bonds to EUR 8.75bn, which was some EUR 2bn more than issuance in November last year. Year-to-date supply reached EUR 107bn, which is some 12% lower than supply last year. Net supply now stands at EUR 6bn negative. Looking forward, we might see a few more deals next week, before the window to the market will close. Still some EUR 6bn of euro benchmarks will redeem before year-end.

TSB Bank in market with 5y GBP floater

TSB Bank has just set guidance for its 5y GBP denominated floating rate covered bond at 3mL +30bps. It follows in the footsteps of Santander UK, which sold a 5y GBP floater at 3mL +23bps earlier this month.

Investorstake profit in Canada and France

Activity in the secondary market mirrored that of the past few days. Peripheral names keep on outperforming on the back of CBPP3 as well as real money investors looking for this paper. Furthermore, Canadian paper is well offered after a strong rally, while we see profit taking in 5y to 15y French paper, although this paper seems well absorbed by trading desks, which are short of inventory.

 Other news

* Moody’s noted that an increase in risk weight requirements on mortgages for Belgian banks will be credit positive, as it will increase the banks’ capital buffers. Moody’s said that risk weights will rise to on average 18%, which would translate in an EUR 1.5bn increase in capital buffers.

* Moody’s assigned a B3 rating to the soft bullet covered bond programme of Greek Alpha Bank. This could imply that we will see the third Greek bank entering the covered bond market, but the first with a soft bullet structure.

* Fitch affirmed the AAA rating of the covered bonds issued by ANZ Bank. The rating buffer is one notch.


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