Covered Bonds

After the recent glut of short term deals, Caisse de Refinancement de l’Habitat could next week bring the first five year bond since ING’s Eu1bn March 2013 was priced on March 13.

US banks have broadly welcomed the Federal Deposit Insurance Corporation’s draft policy statement on covered bonds, confident that any limits the regulator has put in place will not prove overly restrictive in the longer term. But while the FDIC’s endorsement is seen as a crucial first step, some observers are already pressing for more.

Dexia Municipal Agency has priced its Eu1bn seven year public sector obligations foncières issue at 10bp over mid-swaps, taking the realistic attitude required of issuers towards pricing out to the longer end of the curve.

Nordea Hypotek priced its debut Swiss franc covered bond yesterday (Thursday), a Sfr200m deal via BNP Paribas and Credit Suisse to continue the revival of covered bonds in the Swiss market.

Terra Boligkreditt priced its first euro transaction yesterday (Thursday), its public non-jumbo deal adding a new dimension to the reopened covered bond market that was being cited as a reasonable option for even larger issuers.

WestLB is planning to hit the road over the coming weeks for a new public sector jumbo Pfandbrief, with its lead managers crossing their fingers that the market avoids being derailed by a surge in supply before the bond comes to market.

After a declaration that the market is not dead, the rating agencies came under pressure to give clearer verdicts on the relative strengths of covered bond legislations at Dresdner Kleinwort’s covered bond conference in Frankfurt last week. Their answers failed to satisfy everyone, least of all the Association of German Pfandbrief Banks’ Otmar Stöcker.

Moody’s cut Alliance & Leicester’s long term credit rating from Aa3 to A1 yesterday (Wednesday), just days after the UK bank launched and retained the first issue from its covered bond programme. Meanwhile, Düsseldorfer Hypothekenbank has laid out its position in light of Fitch’s rating action last Friday.

Dexia Municipal Agency has opened the books on a seven year euro benchmark in the first test of demand beyond the short end of the curve since covered bond issuance picked up again early last week. And another French issuer is set to follow the obligations foncières with its own seven year issue soon.

Hypo Real Estate International’s Eu1bn two year mortgage Pfandbrief earlier this week showed the new realities facing German issuers today, but the issuer yesterday (Wednesday) told The Cover that it was not unduly concerned about the situation. Meanwhile, the HRE group is being courted by a JC Flowers-led consortium.