Covered Bonds

Does Italy have the most potential of all the new European covered bond jurisdictions? Many think so, basing their optimism on the belief that the country could produce between Eu20bn and Eu40bn of issuance a year. That would put it on a par with France and the UK. But where should the issuance be priced: on a par with Spain or the UK? Philip Moore reports.

HSH Nordbank said yesterday (Thursday) that it plans to launch its first issue of Schiffspfandbriefe soon, having been awarded provisional triple-A ratings from Moody’s for its shipping loan backed covered bonds.

With the rapid growth of the covered bond market, the onus on borrowers and their lead managers to find new — or hitherto unfashionable — investor bases has never been greater. Sometimes the solution to offloading paper has been spectacular, such as the prizing open of the US investor base. At other times, however, innovation has been more subtle and closer to home. Philip Moore reports.

It’s not the first time, and it won’t be the last, that participants in the German capital market have decamped to Luxembourg in response to restrictive legislation or tax rules. Philip Moore reports.

Since HBOS blazed the trail in 2003, the structured covered bond has spread to other jurisdictions, including Germany, where Landesbank Berlin is attempting to launch the first non-Pfandbrief German covered bond. But is this development good for the long term health of the market? Philip Moore reports.

Is including mortgage backed securities (MBS) in covered bond pools an important step forward for the covered bond market, or a further erosion of the quality of the product and of the clarity of the legal framework governing its issuance? Philip Moore reports.

This summer’s volatility in financial markets has resulted in an unprecedented tiering in the covered bond market. While headline risks have exaggerated this trend, investors are now paying more attention to the finer points of individual products and have the bargaining power to get the weaker to pay up. Neil Day reports.

Despite its tremendous growth over the past five years, the covered bond market shows no signs of slowing down. This summer’s volatility has been a nasty patch, but most agree that it will not derail the market’s development. The US has been conquered, new issuers have been welcomed with open arms and even traditional markets, such as Germany, are increasingly embracing innovations and variations on the product. Philip Moore reports.

Amid all the confusion, finger-pointing and hysteria of this week, there is one clear conclusion that can be drawn: some market-makers are simply not up to the job.

Ralf Grossmann, Natixis’s veteran covered bond analyst, quit the bank last Friday to join Société Générale as its new covered bond champion.

Market-making fell into disarray yesterday (Wednesday) when traders decided to quote one half of the covered bond market at wider bid/offer spreads than the other, and then reversed that decision under severe pressure from issuers.

Nationwide’s attempt to build on HBOS’s successful reopening of the covered bond market backfired yesterday (Wednesday) when its haste to issue caused a renewed crisis of confidence in the primary market.