Covered Bonds

Société Générale is planning to issue its debut covered bond, a five year obligations foncières issue of up to Eu1.5bn backed by loans to the public sector, according to a report from Standard & Poor's.

JP Morgan’s revised bid for Bear Stearns buoyed equity markets this morning, lifting spirits around the financial markets, but syndicate officials said that it would be premature to launch a new covered bond issue. One even suggested that the recent secondary market paralysis could put a cap on any recovery in spreads.

The frost that has settled over the covered bond market in the last week showed no signs of thawing today, as market participants consider hibernating until spring. Despite the gloomy headlines dominating financial markets at least one banker thought that the enforced break might prove a necessary evil.

The Cover last week chanced upon the following transcripts, believed to have been deemed surplus to the FBI’s wiretap investigation of prostitution rings in New York. However, on closer inspection the e-mails did indeed reveal that solicitation had taken place in a high class hotel, albeit unsuccessfully. A white-bearded fat man in a red suit is the main suspect.

Norges Bank Investment Management has been telling issuers and other counterparties that reports it is reassessing the position of covered bonds in its portfolio are “rubbish”, saying that the product continues to have the same weighting in its benchmark.

The quest for an issuer to re-open the market continues, with Dexia Municipal Agency believed to have found limited enthusiasm for a new deal after pre-sounding in difficult conditions. Meanwhile, Italy’s Banca Popolare di Milano (BPM) has attempted to push itself to the front of the Italian bond queue following remarks by an official at the bank.

John Winter, head of European investment banking and debt capital markets at Barclays Capital, recently spoke to EuroWeek’s Toby Fildes about the firm’s strategy. In this excerpt he discusses the fixed income business and gives his views on the future of covered bonds, market-making and the firm’s league table position.

Ronald Reagan once famously declared: “There are no such things as limits to growth, because there are no limits on the human capacity for intelligence, imagination and wonder.” Covered bond issuers and regulators at the Euromoney US Covered Bond Investor Forum in New York last week may not be as unconstrained in their hyperbole as the former US president and star of hit film Bedtime for Bonzo, but they enthused how covered bonds could grow in the face of regulatory limits and their interaction with retail depositors.

With the primary market shut again after ING wriggled through a brief opening last week, the covered bond market has been casting about for likely candidates to re-open it after the Easter holiday. The wide range of mandates outstanding — some of them from last year — is proving an obstacle to identifying the market’s white knight.