Covered Bonds

Banco Bilbao Vizcaya Argentaria has begun updating the value of properties backing mortgage loans collateralised in its Cédulas. Though this is likely to lead to a decrease in the overcollaterlisation (OC) ratio, Moody’s applauded the move as it will improve transparency on the credit quality of the cover pool assets.

Banca Carige has mandated leads for a potential euro-denominated covered bond (Obbligazioni Bancarie Garantite) benchmark transaction, which could be launched on Thursday just as the US debt ceiling deadline falls due.

Standard & Poor’s has asked for feedback on its plan to reduce the maximum differential between sovereign and covered bond ratings. Over half the ratings of Spanish, Portuguese and Italian covered bonds would be downgraded by two notches, it said.

Norway’s banks will not be hit by the finance ministry’s latest changes to balance sheets rules that affect mortgages, as they already operate on a stricter footing, a local banker told The Cover on Tuesday. From next January the loss given default floor for mortgage assets on Norwegian bank balance sheets will double, the finance ministry announced on Sunday.

Despite the close proximity of the US debt deadline on Thursday, the covered bond market was stable and well supported on Tuesday, said bankers, who are waiting for imminent deal mandates from Austria and Italy.

Moody’s average timely payment indicator (TPI) leeway has fallen, driven by the link between sovereign ratings and covered bond programmes, the agency said on Tuesday, in its second quarter 2013 covered bond monitoring overview.

Lead managers on ABN Amro’s first Dolphin RMBS since 2011 started taking indications of interest for the €500m of ‘A’ notes on Monday morning, after the issuer finished a week long roadshow on Friday.

After last week’s flurry of covered bond deals, the primary market kept up its pace on Monday as Norddeutsche Landesbank mandated leads to roadshow a US dollar benchmark, while Aareal Bank priced a small floating rate deal in euros. The secondary market was well supported, but activity was limited by mounting concern that this week’s US debt ceiling deadline may be broken.

This week’s three Italian covered bond issues continued to outperform in secondary trading on Friday while the primary market paused for breath. Meanwhile, Moody’s has put Credito Emiliano’s mortgage covered bonds on review for downgrade, highlighting the benefits of smaller Italian banks coming to market before further rating moves.

Italian mid-sized banks this week ended the national champions’ stranglehold on Italian covered bond issuance so far this year. An accommodating backdrop and clear demand for Italian paper in secondary markets enticed three issuers to market, two of which were making covered bond debuts.

Commerzbank launched a new mortgage Pfandbrief programme this week, making light of its debutant status to price a seven year trade flat to mid-swaps.

Two issuers succeeded with covered bond debuts on Thursday. Mediobanca’s choice of a 10 year maturity for its inaugural deal was vindicated when it priced a €1bn benchmark comfortably inside guidance, while Commerzbank’s first foray into the mortgage Pfandbrief market enjoyed the smooth execution expected of a leading German bank.