Covered Bonds

Bank of Ireland returned to the covered bond market on Tuesday to issue its fifth deal since November 2012, when it returned after the Irish sovereign debt crisis. The transaction was well oversubscribed with plenty of orders, but less spectacularly so than on previous issues.

Fitch’s covered bond rating methodology, which was altered this week, may be construed as too harsh. Fitch favours systemically important banks, but Crédit Agricole notes that this is to the exclusion of smaller banks that issue covered bonds which have also benefitted from public support. Fitch favours six countries that issue a lot of covered bonds, but the analysts argue this number is too low.

Moody’s has become the second of the big rating agencies to overhaul its covered bond rating schema. It has given 15 European programmes a one notch upgrade, while nine are on review for upgrade and three downgrade reviews have been scrapped.

Bail-in rules that affect covered bonds are set to be tightened up to give investors more explicit protection in the event of a bank resolution, a banker told The Cover on Thursday. The new draft of the rules makes it clear that EU member states must ensure the banks have enough assets to ensure full and timely payment, even if this is above the minimum stipulated under national law.

Westpac has issued its first euro denominated covered bond deal of the year and the second from an Australian issuer. The transaction was modestly oversubscribed as bank treasuries were absent due to the fact the bond is ineligible for bank liquidity buffers and for being repo’d with the European Central Bank.

Julia Hoggett is leaving Bank of America Merrill Lynch to join the Financial Conduct Authority (FCA), to run the investment banking supervision division, starting in early May. Her departure follows a string of high profile exits from the firm.

This week’s sweep of covered bond primary deals have all performed well in the secondary market, and on Wednesday, bankers assessed the syndications. Although conditions remained buoyant, bankers said they did not expect any more deals this week.

Singapore

Bank of Ireland returned to the covered bond market on Tuesday to issue its fifth deal since November 2012, when it returned after the Irish sovereign debt crisis. It was well oversubscribed with plenty of orders, but less spectacularly so than on previous issues.

Spain’s CaixaBank took advantage of strong market conditions on Tuesday to issue the country’s second covered bond of the year. The funding took advantage of scarcity at the long end of the Spanish market, and concerns that the other Spanish national champions are more exposed to emerging market risks.

Länsförsäkringar Hypotek (LF Hyp) issued Sweden’s first covered bond deal of the year on Tuesday, having identified solid excess demand in Monday’s deal from Finland’s OP Mortgage Bank. The euro funding was cheaper than what the borrower could have achieved in Swedish kronor.

Fitch is the first of the three major rating agencies to announce changes to its covered bond rating schema and has amended its covered bond rating criteria, taking into account the positive effect of bank resolution regulation.