Covered Bonds

Moody’s has said that a transfer of relatively risky assets from Crédit Foncier de France (CFF) to its parent BPCE is credit positive.

The race is on to issue the second legally compliant covered bond from New Zealand after the Reserve Bank of New Zealand signed off the covered bond programmes of ASB Bank, ANZ New Zealand, Bank of New Zealand and Kiwibank under the new law on Friday. The borrowers will be looking to emulate the success of Westpac New Zealand, which got a fantastic reception for its legally compliant debut in June.

European covered bonds have been relatively stable in the secondary market this week, though second tier banks in the periphery widened marginally on light selling on Friday, with Banca Monte dei Paschi di Siena leading the way after posting a higher than expected loss. The move is likely to be short-lived provided the geopolitical backdrop does not worsen.

Issuers expect that covered bond issuance after the summer break will be front-loaded, with a busy September likely to be followed by a quiet fourth quarter.

Moody’s this week got round to taking rating action on over 40 Spanish multi-Cédulas covered bonds on Friday.

French public sector covered bond issuer Caffil is expected to continue outperforming the domestic market following the approval of a French law that limits the litigation risk it was facing.

Covered bond bankers are increasingly fielding calls from mainly German banks who want to know whether their covered bond investments are compliant with Article 129 of the Capital Requirements Directive (CRD). The process has become more challenging recently, because the European Central Bank will no longer provide this information.

Given that covered bonds have been carved out of bank resolution, should they still be considered a part of bank credit? Investors should think about redrawing their credit lines to distinguish between state-supported and bail-in debt.

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Given that covered bonds have been carved out of bank resolution, should they still be considered a part of bank credit? Investors should think about redrawing their credit lines to distinguish between state-supported and bail-in debt.

The Australian market for covered bonds has seen the fastest growth of any jurisdiction over recent years, said Deutsche Bank’s research team on Thursday. This extraordinary growth may reflect the regional banking system's dependency on wholesale funding. But Moody’s was constructive on the covered bond market in a report published on Wednesday, and with bonds likely to become eligible for European bank liquidity buffers, spreads are expected to tighten.

Covered bond bankers are increasingly fielding calls from mainly German banks who want to know whether their covered bond investments are compliant with Article 129 of the Capital Requirements Directive (CRD). The process has become more challenging recently because the European Central Bank will no longer provide this information.