Covered Bonds

Lars Humble is set to join Goldman Sachs’s London debt syndicate desk on February 27, The Cover’s sister publication, EuroWeek, reported yesterday (Thursday). He will work mainly on the high grade syndicate, including covered bonds.

Peter Freilinger, senior vice president and assistant treasurer at Washington Mutual, said today that he would like to see either the Seattle-based institution or Bank of America, the only other US covered bond issuer, selling a jumbo in the first half of this year. WaMu could also target US investors through private placements.

null

Issuers’ enthusiasm for covered bonds was painted as a double-edged sword at the Marcus Evans conference in London today, as market participants said investors were cautious of the market because they feared oversupply. One panellist suggested that the challenges this had thrown up meant the risks of being a covered bond banker were for once commensurate with the rewards.

Sparkasse KölnBonn priced its non-jumbo covered bond yesterday afternoon, while in the non-covered bond jumbo market Land Niedersachsen mandated a Eu1.25bn 10 year issue this morning. The jumbo covered bond market, however, remains dead.

Sheila Bair, chairman of the Federal Deposit Insurance Corporation, last week reiterated her view that covered bonds could be the cure for some of the ills of the US mortgage market, saying that developing the market in the US had become a “front-burner issue”. While encouraging words about the future of covered bonds in the US from such an important player are most welcome, it is perhaps better for the long term fortunes of the market if any misconceptions are cleared up early on.

The UK sector of the covered bond market went from bad to worse this morning. Having already widened around 10bp over the past week, UK issues were wider still today after the release of Bradford & Bingley’s preliminary results.

Depfa is reacting to the volatile market conditions by reducing the minimum size for its euro benchmarks this year from Eu2bn to the usual minimum jumbo standard, typically Eu1bn. The bank is also likely to continue its focus on the private placement market for issuance in 2008.

Sparkasse KölnBonn opened books for a Eu500m three year mortgage Pfandbrief issue that features market-making at 2bp over mid-swaps this morning. A syndicate official at leads Barclays Capital, Deutsche Bank and WestLB said that the order book was developing very well.

EFG Eurobank, the third largest bank in Greece, is poised to be among the first to take advantage of the new Greek covered bonds legislation. It plans to meet its wholesale funding target of approximately Eu4bn this year through a debut covered bond alongside two ABS issues.