Covered Bonds

Goldman Sachs will give investors more time to understand the unique structure of its Fixed Income Global Structured Covered Obligation (Figsco) and appreciate just how different it is from a pure market value deal, or a covered bond (This story has one comment).

Fitch said it will start to disclose the breakeven overcollateralisation (OC) components for its covered bond ratings. The three components will provide a standardised way of expressing the agency’s opinion on the key factors that determine the relationship between OC and a covered bond rating, and this should help investors to compare different programmes.

HSH Nordbank has mandated joint leads for a €500m five year mortgage Pfandbrief, which is expected to be priced on Thursday. Market conditions for core issuers look favourable with Bund yields tightening further.

Swaps associated with covered bonds that are compliant with the capital requirement regulation, do not need to be centrally cleared. This will act to strengthen the difference between what is a real covered bond and what is a mere lookalike.

Nationwide became on Tuesday the third British financial institution to offer a three year floating rate note (FRN) this year. Looking to harness the remnants of the momentum it built in the market during its dual tranche euro deal at the end of last month, the building society’s deal was more oversubscribed than the other two similar deals — from Abbey and Lloyds Bank — done in January.

Banca Monte dei Paschi di Siena (MPS) took advantage of its new position among covered bond investment grade borrowers to take a 10 year benchmark to market on Tuesday. Given its €1bn seven year tap in April attracted one of the highest oversubscriptions of any covered bond of that size this year, expectations for Tuesday’s deal were high. But on that basis the deal disappointed, despite it delivering another €1bn for the issuer.

BNP Paribas has named two senior executives to drive its fixed income business in Germany, as part of its decision six months ago to upgrade Germany to one of its domestic markets, alongside France, Belgium, Luxembourg and Italy.

The cover pool backing Goldman Sachs’ fixed income global structured covered obligation (Figsco) programme is too weak to secure a rating uplift to the issuer of the underlying special purpose vehicle — Goldman Sachs Mitsui Marine Derivatives Products (GSMMDP), the joint venture guaranteed by Goldman Sachs and Mitsui Sumitomo Insurance, Fitch said on Monday.

A US covered bond legal framework may soon be back on the political agenda. A speech by Jacob Lew, US Treasury secretary, last week has caught the attention of market participants, who hope a covered bond bill may be detached from reform of the US government-sponsored enterprises, Fannie Mae and Freddie Mac.

UniCredit Bank Austria (UBA) has tripled the share of non-profit housing loans in its mortgage pool in a year and reduced the share of riskier commercial mortgages, in a move which Moody’s said was credit positive for its Aa1 programme.

With €70bn sold this year, covered bond issuance should trounce last year’s €98bn total. Better still, with several countries returning to the market and regulations likely to improve market conditions for covered bonds, this year’s progress should be sustained for years to come.

Toronto-Dominion Bank could become the next Canadian bank to issue a covered bond after it received regulatory approval from the Canada Mortgage and Housing Corp (CMHC) for its first legally compliant covered bond. Overall covered bond issuance is set to exceed last year’s supply as old borrowers return and new ones consider their first deals.