Covered Bonds

Spain’s Kuxtabank is on the road next week, marketing its first Cédulas since January 2013, and there are high hopes that several other covered bond issuers will make an appearance.

The Swedish Financial Supervisory Authority (FI) on Thursday introduced tighter capital requirements for four major Swedish banks. FI intends to activate a countercyclical capital buffer and has said it will increase the risk weight of mortgages to 25% from 15%, in line with a central bank recommendation.

Depfa ACS's bonds could go on to trade tighter than any other Irish covered paper as the names of the failed bank’s preferred bidders emerged. The prospective buyers' strong rating suggests Depfa ACS's rating is safe, and even if a sale is not agreed, the German government’s continued ownership means the rating is protected.

The European Commission (EC) could be ready to lift the amount of covered bonds that can be used to fill Liquidity Coverage Ratio (LCR) requirements from a maximum of 40% to 60%, according to the head of the Danish Mortgage Bankers Federation. The outcome could be known within a few days.

The Italian Banking Association (ABI) conference kicked off in Milan on Wednesday, where participants discussed amendments to the Obbligazioni Bancarie Garantite framework and considered ways to induce SME lending with reference to the newly proposed Obbligazioni Bancarie Collateralizzate framework and the ABS market.

The covered bond market was in good shape on Wednesday as bankers reported renewed interest in peripheral names and the multi-Cédulas sector. The primary market is expected to pick up next week as Scandinavian and German issuers line up.

The state owned Dexia Kommunalbank is expected to return to the covered bond market for the first time in three years. Being among the lowest rated bonds issued this year from Germany, the spread pick-up should prove attractive.

The Swedish Financial Supervisory Authority (FI) announced on Thursday that it will introduce higher capital requirements for four major Swedish banks. It also intends to activate a countercyclical capital buffer and has said it will increase the risk weight of mortgages from 15% to 25%, in line with the Riskbank’s recommendation last year.

Depfa ACS covered bonds were unchanged on Thursday as the names of the failed bank’s preferred bidders emerged. The buyer’s strong rating suggests the covered bond rating is safe, and even if a sale is not agreed, the German government’s continued ownership means the rating is protected. As such, the covered bonds which have the highest rating in Ireland, should be trading tighter than all other Irish deals.

The Italian bankers association (ABI) conference kicked off in Milan on Wednesday, where participants discussed the new OBG framework and considered ways to induce SME lending with reference to the newly proposed Obbligazioni Bancarie Collateralizzate framework and the ABS market.

The covered bond market was in good shape on Wednesday as bankers reported renewed interest in peripheral names and the multi-Cédulas sector. The primary market is expected to pick up next week as Scandinavian and German issuers line up.

Cristina Costa has joined Société Générale as senior covered bond analyst.