Covered Bonds

The IMN covered bond conference concluded yesterday afternoon by looking to the future in a discussion on emerging markets, with representatives from Mexico described the important role they envisage for covered bonds in solving the country’s housing shortage.

Major UK covered bond issuers and other market participants yesterday welcomed the legislative approach set to be introduced by HM Treasury in early March and overseen by the Financial Services Authority, on a panel at the IMN covered bond conference in London.

Dexia Municipal Agency is set to price a new five year issue at guidance of 4bp over mid-swaps through ABN Amro, Deutsche Bank and SG CIB, having built a book of over Eu2bn. Read The Cover tomorrow for the full story and the new pricing paradigm for obligations foncières.

Analysts embarked on a perilous quest at the IMN covered bond conference in London yesterday afternoon. Armed only with data and pricing models, they set off in pursuit of relative value, pausing briefly to discuss adequate disclosure.

Panellists at the IMN covered bond conference voiced their approval today of the Netherlands’ new legislative approach, set to be implemented on 1 July. They defended its principle based approach against charges that a prescriptive law would be more appropriate in the current climate, saying that the flexible framework would prove its worth in the long-run.

The first formal proposals on how to reform market-making in light of its failings in the past six months and to put an end to internecine trading have been sent out by the European Covered Bond Council to its members for comment.

Rating agency representatives yesterday afternoon discussed their various methodologies and the weight they give to legislative backing, a key issue as the market sees new structured issues from Canada and previous structured issuers, such as the UK, on the cusp of introducing a legislative framework.

With the covered bond market experiencing the effects of turbulent equity markets and economic gloom from the US, panellists at the IMN covered bond conference in London said that now was the time for a back to basics approach in the market.

The covered bond market might have been quiet today, but at the IMN conference in London it was standing room only and delegates were greeted by a strong vote of confidence in the product as a panel looked ahead at the market in 2008.

Delegates at the IMN covered bond conference in London expressed bafflement that an issue that has been the source of much heated discussion was allocated one of the shortest time slots today, but were still treated to a lively performance from the panel on liquidity and secondary market making.

Clifford Chance LLP, 10 Upper Bank Street, Canary Wharf, London

Bank of Nova Scotia, the second largest Canadian bank by market capitalisation, is on a roadshow for its US$15bn covered bond programme, and is keen to follow Royal Bank of Canada (RBC) and Bank of Montreal (BMO) into the covered bond market. But when it comes to pricing, BNS is keen to position itself beside RBC rather than the wider BMO.