Covered Bond Issuance rises 21% YoY fuelled by UK FIGs

Post Date: 02/05/2018

By Ioannis Gougoulias

The data below were retrieved using CMDportal's Data Sheet and Instrument Search tool. Use the "Covered Bond" filter at the end of the page.

International Covered bond issuance rises 21% YoY

The international Covered Bond market has recorded a significant 21% increase YoY. Based on CMDportal data, the total amount of Covered issued from 1st of January since 20th of April 2018 was close to EUR52bn. This amount is up EUR8.8bn compared to the amount of covered bonds issued for the same period last year. Once again, EUR denominated deals dominated the market. The EUR segment accounted for more than 76% of the total amount and reached EUR39bn, signalling a EUR3bn or 8% increase YoY.

GBP covered bond issuance skyrockets as UK FIGs search for TFS alternative

What stands out is that GBP-denominated issuance is up by 251%. The total amount of Covered Bond GBP trades reached EUR11.5bn so far in 2018. This suggests a EUR8.2bn increase compared to the same period in 2017. This boost was fuelled by traditional players of the GBP covered bond market, such as FIGs and building societies, who tapped the market, issuing some large trades. Specifically, Lloyds Bank visited the market twice in 2018, in early January and late March 2018 printing in total GBP2.25bn in two covered bonds trades (find more information here), while Nationwide Building Society printed also a GBP1bn, 5-year covered bond (read more here). It seems that the termination of the Bank of England’s Term Funding Scheme on the 28th of February 2018, has lead UK domestic banks to search for a new alternative of secured funding, relying now in the covered bond market.

Canadian covered issuance doubles YoY, more issuance expected due to bail-in regulation  

At the same time, Canadian issuers appeared a lot active in the specific market. According to CMDportal figures, the international covered bond issuance by Canadian FIGs reached EUR7.5bn, increasing by EUR3.7bn or 100% YoY. The largest chunk of the issuance was done in the EUR currency, around EUR5bn, while the rest was done in Sterling. The National Bank of Canada returned to the Covered Bond market after 2016 printing a EUR750m, 7-year ticket (read more here), while Bank of Nova Scotia issued a EUR1.25bn bond backed by Canadian residential mortgages (read more here). The newly introduced Canadian bail-in regulation is expected to increase covered bond appeal in the rest of 2018, sending the figures even higher.

Dutch, Austrian and German Banks contribute to Covered Bond issuance

Taking into consideration the Netherlands, Germany and Austria we identify an upward trend in their Covered bond issuance compared to last year. Specifically, the activity in this market from the these central European countries has gone up by 32%. The largest chunk of the increase comes from Dutch FIGs, such as ABN Amro, ING and Rabobank. ABN Amro raised EUR3.25bn in Covered bonds issuing 2 trades in just two months, while Rabobank printed a EUR1.125bn, 10-year bond in early February and a dual tranche EUR2bn in mid-April 2018.

German borrowers appeared active for one more year in the Covered bond market, raising in total EUR3.7bn. Helaba and Dekabank are some examples of German FIGs printing Pfandbriefs. Austrian issuers, with Erste Bank and Reiffeisen increased their issuance by 29% YoY (read more about Austrian Covered bond here).


 The European Union prepares a covered bond directive aiming to strengthen national laws

The EU proposed covered bond regulation will have a regional brand and benefit from lower capital charges to increase market funding for the economy.

Although, such bond are popular in countries such as Germany (Pfandbrief) and are considered an important funding tool for FIGs and the wider economy, other countries do not rely on them. Countries, such as Croatia, Estonia and Malta lack covered bond legal frameworks and Bulgaria, Latvia, Lithuania and Slovenia need updates to their frameworks.

According to Moody’s, the EU draft framework for covered bonds will ensure there are some centralised rules governing key features. This will help, eventually, to maintain and strengthen credit features of covered bonds as new and existing markets develop. Brussels wants the sector to grow as part of its capital markets union (CMU) project to encourage more corporate funding from markets and reduce the region’s reliance on bank loans.

Where is this data coming from?

CMDportal is the global bond and money market utility connecting issuers, dealers and investors. The service aggregates data from a wide range of sources, including issuers, dealers and fund investors recording both who issued, who traded and who bought the instruments.

Can i produce a Debt Capital Markets statistical query like this?

Yes you can. CMDportal provides a wide range of tools to analyse bond and money markets. Data Sheet results can be downloaded as an XLS file.

Mr. Gougoulias is an Analyst at CMDportal. He can be reached at