Covered Bonds

Italian FIG supply is likely to remain limited over the rest of this year as Parliamentary budget negotiations and concerns over the presentation of Banca Carige’s capital conservation plan raise deal execution risk. However, one or two covered bond deals cannot be ruled out.

Banca Carige’s covered bonds could soon be downgraded by Moody’s to sub-investment grade territory but, given the size and quality of the collateral pool, further downgrades could present a buying opportunity.

Despite a deterioration in the affordability of housing in New Zealand, loan-to-value ratios are low and homes are comparatively more affordable than they are in much of Europe. Even though credit risks remain contained, it seems likely that spreads in the New Zealand covered bond market are set to be repriced wider.

Green Italian bond supply has good scope to grow, and banks are likely to play a central role in the rise, according to Standard and Poor’s. Given the old age of Italy’s building stock and the importance of financing for small and medium-sized enterprises (SMEs), green covered bonds and green European Secured Notes could play a vital part.

Transposing the European Commission’s covered bond directive into Spanish Cédulas law should result in multi-notch Cédulas upgrades, Fitch said. This could help allay concerns about other legal reforms that will lower collateral protection, and help boost confidence that the impending overhaul of the Spanish legal framework can be executed deftly.

NatWest Markets has come a long way since the dark days of its repeated restructurings. For a while, RBS was a punchline for gallows humour about the state of investment banking (not to mention the participation of the state in investment banking). Senior bankers jumped or were pushed, while the firm closed offices, sold off its US operations, trimmed its ambitions and seemed ready to settle down as a bit-part domestic player in the capital markets. But it is often darkest before the dawn.

Fitch has assigned an AAA rating to the debut covered bond programme of ING Bank in Australia (INGBA).

The merger between DG Hyp and WL Bank has become legally effective and the rebranded entity, DZ Hyp, is now the largest German Pfandbrief issuer.

The green covered bond market looks set for growth, possibly even outpacing the broader green bond market, said Moody’s in a report this week.

An exemption for Canadian covered bonds from bail-in is positive, said Fitch this week despite a general concern about the lack collateral available in some covered bonds, and an overvalued Canadian housing market.

National Bank of Greece has sold a €200m five year covered bond to the European Investment Bank (EIB) just as Moody’s changed its outlook on the Greek banking sector to positive.

The concept behind the European Secured Note was never genuinely driven by a desire to improve bank funding options, but by a need to ring-fence the quality of assets in covered bonds.