Group Economics
Covered Bond Comment
Macro & Financial Markets Research Joost Beaumont +31 20 628 3437
New issues matched redemptions in April
joost.beaumont@nl.abnamro.com
DISCLAIMER: This report has not been prepared in accordance with the legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead. This report is marketing communication and not investment research and is intended for professional and eligible clients only.
04 May 2015
New supply of euro benchmarks amounted to EUR 11bn in April This roughly matched redemptions, keeping ytd negative net supply at EUR 4bn Almost all April new issuance was in the belly of the curve Primary market to remain quiet due to holidays, market sentiment, and blackouts French OFs and Austrian covered bonds outperformed in April
Overview new issues, redemptions, corrected for ECB
French OFs and Austria outperformed in April
The total amount of new euro benchmark issues slowed
In April, French OFs and Austrian covered bonds outperformed
slightly in April compared to March. 15 New euro benchmarks
according to Markit data. The asw-spread both iBoxx indices
(including taps) were launched last month (March: 16), raising
tightened by around 8 to 9bps in April. In France, the CFF 2
a total amount of EUR 10.5bn (March: EUR 12bn). This
05/07/24 was the start performer, while more generally, paper
compared to EUR 11bn of redemptions. Year-to-date supply of
of CFF as well as CAFFIL did very well in the 2020 to 2025
euro benchmarks now amounts to EUR 52bn, while
maturities.
redemptions total EUR 56bn. As a result, net supply currently amounts to minus EUR 4bn. Correcting for the ECB’s covered
In Austria, covered bonds clawed back some value after they
bond purchases in the primary market (estimated at EUR
were hit by negative headlines earlier this year. A breakdown
8.5bn), negative net supply amounts to EUR 12.5bn.
of the Austrian benchmark shows that the benchmarks of HYNOE did best, while spreads of the outstanding 2025s of
Half of this year’s deals is in belly of the curve
ERSTBK and BACA came second. Less performing was the
Furthermore, it is interesting to note that all but two new deals
ERSTBK 2016, of which the spread remained roughly
had a maturity between six and eight years. Year-to-date,
unchanged. Finally, Nordic paper did relatively less well, as
around half of new issues had such a maturity in this range,
spreads tightened by some 2 to 3bps.
compared to less than one third during 2014 as a whole. This clearly shows that the low yield and low spread environment
iBoxx euro benchmark covered bond index
has led to issuers and investors moving up the curve. Indeed,
Monthly change in asw-spread (bps)
10y+ deals have also increased.
SWE IE DK FIN NO NZ UK NL IT PT CH DE-hyp CAN AUS DE-publ BE FR-SFH ES-multi ES-single AT FR-OF
Primary to remain quiet Looking forward, it is likely to remain quiet on the primary market. Today is a holiday in most European countries, while Monday is a bank holiday in the UK. Furthermore, UK elections and Greece are in the spotlight. It is reported that Greece and its creditors are speeding up discussions in order to reach a deal before the new eurogroup meeting on 11 May. In addition, and more importantly, the sell-off in the government bond
-10
-8
-6
-4
-2
0
market continued yesterday, which will most likely keep issuers on the sidelines. We expect issuers to prefer to wait with new
Source: Markit
issuance until the market has entered calmer waters. Finally, many banks are still in blackout.
Other news: * Northern Rock Asset Management announced that it will
Only Akbank and Alandsbanken are in the pipeline, but they
hold a tender to buy back the NRKLN 3 ⅞ 11/16/20. The
will go on roadshow first.
purchase price is 121.494 and purchase yield is -0.013%.
Insights.abnamro.nl/en
Bloomberg: ABNM