Covered Bonds

The number of active covered bond borrowers looks set to hit a new record after Moody’s assigned its top rating to the hard bullet mortgage covered bond programme of Austria’s Raiffeisenlandesbank Oberoesterreich (RFLBOB).

Obvion’s €1bn Purple Storm Dutch RMBS deal, which sold the entire capital stack, shows that despite the growth of whole loan portfolio sales, there is still interest in using securitization as a capital relief tool.

Covered bond secondary market volumes saw a small improvement on Thursday, but with limited supply and continued central bank buying, the market is set to become more technically squeezed over summer.

Commerzbank issued the first euro covered bond since June 15 on Monday, and though it was a clear success, no other issuer ventured to follow.

Covered bonds saw a relative improvement in flows on Thursday, but with a limited supply outlook and continued central bank buying, a technical squeeze had begun to take hold. CIF Euromortgage performed well after regaining preferential regulatory treatment.

European ABS investors are set to get a rare slice of French RMBS, with GE Money Bank in France hitting the road with €2bn of French residential mortgages.

Asset encumbrance caused by covered bond issuance has increased over the past year, according to the European Banking Authority. However, there has not been much change in the overall level.

The ratings of non-UK covered bonds that are partly backed with UK assets will not be affected by the downgrade of the UK from AA+ to AA, said Fitch on Wednesday. However, if the UK does not enter the European Economic Area (EEA) some Pfandbriefe could be affected according to an earlier report from Moody’s.

Regulations governing maximum loan to value (LTV) ratios on mortgage lending imposed by Finland’s Financial Supervisory Authority that take effect this month are positive, but they will have a limited impact on Finnish covered bonds.

Covered bonds opened wider, in line with a softening in credit markets, but quickly rebounded to being unchanged from Monday’s close, although Commerzbank’s latest deal has outperformed.

The European Central Bank’s rate of covered bond purchasing in June was little changed from May and close to the lowest this year.

Commerzbank issued a well-received €750m eight year covered bond on Monday. The first euro benchmark since June 15 sends a strong signal to other issuers that have funding needs and shows that the sometime precarious funding window is now firmly open.