Covered Bonds

DBS Bank has become the first issuer outside the European Economic Area (EEA) to be granted membership to the Covered Bond Label Foundation (CBLF).

Santander has issued European covered bonds from Spain, Portugal and UK but could soon be about to issue Obligations Foncières from a new French programme. However, the sub benchmark sized deals are likely to be placed with the ECB said bankers.

Italian Banca Monte dei Paschi di Siena S.p.A (Monte) has changed the structure of all its outstanding covered bonds from hard bullet to conditional pass through (CPT). The success of the consent solicitation may encourage others to follow.

Covered bond spreads were tentatively tighter on Friday in the expectation that some sort of deal would be agreed with Greece over the weekend. Parts of the market have repriced and there is scope for selective issuance, but a government bond rally would help.

Polish covered bonds are one step closer and with 90% of members of parliament in support of the new draft, bankers say it is only a matter of time before the proposals become law.

Santander has issued European covered bonds from Spain, Portugal and UK but could soon be about to issue Obligations Foncières from a new French programme.

Moody’s has implemented its new rating methodology and upgraded a broad range of covered bonds, some of which get better regulatory treatment.

July is typically a slow month for covered bond issuance, but with the primary market having been on hold for much of May and June, it might for once be the time for issuance.

Covered bonds not eligible for the European Central Bank’s covered bond purchase programme (CBPP3) widened further on Thursday, while the rest of the market was largely unchanged on low volumes. Traders are axed to offer and reluctant to show bids.

Moody’s has been the first agency to recognise the need for a more defined waterfall of senior obligations within a bank’s capital structure and now Fitch is also considering this problem.

Moody’s positive rating action on German and Italian covered bonds will help improve structural demand for selective programmes. However, with Fitch still rating many programmes at a lower level the full benefit will be muted.

Sentiment in core covered bonds is holding in with core European five year paper trading steadily. Peripheral bonds are less well placed and deals not eligible for the European Central Bank’s covered bond purchase programme (CBPP3) are offered in good size.