Covered Bonds
-
GlobalCapital: What are the drivers for change on the funding mix between senior, covered and capital?
-
GlobalCapital: What’s your view on the extent that we can expect other shocks or disappointments affecting spreads? El Amir, UniCredit: If you look at the subordinated product like lower tier two, that’s been hit pretty hard across the board. So it certainly feels like people have taken Argentina, disturbances in Israel, BES, and everything else, as an excuse to take profits.
-
GlobalCapital: What does the TLTRO mean for spreads? Timo Boehm, Pimco: We expect it will lead to more demand from banks but also on the primary side our expectation is that it may also lead to less issuance which would be supportive to spreads tightening. I suppose that banks themselves will invest in the periphery as, though spreads tightened a lot this year, there is still a decent pick-up there. In addition, we expect less new issuance out of the periphery. We will see a few more peripheral deals this year which pales in comparison to the amount of bonds being redeemed.
-
-
GlobalCapital: It looks like covered bonds will go to Level 1 of the LCR and non-EEA bonds could come in as a Level 2A asset? How does this change things? El Amir, UniCredit: It is good news. A lot of the analysis on covered bonds showed that they were as liquid as sovereign bonds, so including them in the Level 1 was the right decision. I think it will incrementally improve demand but I don’t think it is just going to be exponential just because most of the market assumed they were going to be level 2A. Our liquidity portfolio had been buying a significant amount of covered bonds already, so the fact they’re now Level 1 isn’t going to change our behaviour hugely.
-
-
-
GlobalCapital: How rapidly do you think an administrator could sell the mortgage portfolio of an insolvent bank?
-
-
-
Jozef Prokes, a portfolio manager within the European fixed income team at BlackRock (AuM: €24bn), speaks to The Cover in a podcast interview about the aims of the European Central Bank’s (ECB) third covered bond purchase programme (CBPP3). Prokes addresses a range of topics including the risks investors face with the globalisation of covered bonds, pass-through structures, SME covered bonds and how his firm is coping with low interest rates.
-
The Brazilian Finance Ministry expects to publish its draft covered bond law this week and, by using a presidential order, the legislation could be effective soon, Matheus Cavallari, deputy secretary for microeconomic policy at the ministry told The Cover. He said two large issuers had already sought regulatory approval to issue covered bonds.
