A high number of newcomers are currently making their covered bond debuts in rapid succession. From the U.K., Yorkshire BS and HSBC are readying the launch of their respective debut U.K. covered bonds programs. From Sweden, Swedish Nordea Hypotek and SCBC are also prepping parallel issues. But market analysts say that the covered bond issuance deluge should not pressure performance because demand for this paper remains sufficiently high, especially since it offers name diversification.
"Last year's example of Sampo and ABN Amro successfully launching their inaugural deals within the same week indicates that a cluster of newcomers does not necessarily burden performance," said Ted Packmohr, a research analyst at Dresdner Kleinwort Wasserstein. "Nevertheless, it has clearly become a buyers' market, and too ambitious a pricing target - even if only slightly so - can materially undermine a new issue's success. The upcoming newcomers should therefore adhere to the typical new entrant premium requested by investors."