Covered Bonds

Overnight downgrades of Italian and Spanish covered bonds to junk are likely to have only a fleeting impact on spreads, bankers said today. The hunt for yield and a more flexible approach to assessing credit has ensured there is a pool of ready demand for speculative grade debt.

Morocco’s government is set to establish Africa’s first covered bond regime, as it looks to promote mortgage lending in the face of rising demand for affordable housing. However, bond issues are likely to be local currency denominated, limiting the scope for investment from the traditional covered bond buy-side.

Caja Rural de Navarra has picked joint leads for a roadshow and possible deal. Its announcement late on Wednesday came after Moody’s said that the prospective A3 rated €500m Cédulas was over-collateralised by 623%, a level that should allay any concerns over prospective negative equity in the underlying mortgage loans.

Analysts were left disappointed this week after Norway’s central bank refused to allow covered bond mortgage subsidiaries from using its lending facility.

The newly formed Cajas Rurales Unidas (CRU) accessed the capital markets for the first time this week, issuing a €500m three year Cédulas Hipotecarias.

Caja Rural de Navarra has picked joint leads for a roadshow and possible deal. Its announcement late on Wednesday came after Moody’s said that the prospective A3 rated €500m Cédulas was overcollateralised by 623% which will allay negative equity concerns.

Morocco’s government is set to establish Africa’s first covered bond regime, as it looks to promote mortgage lending in the face of rising demand for affordable housing, after a decade of growth in the country. However, bond issues are likely to be local currency denominated, limiting the scope for investment from the traditional covered bond buyside, said Standard & Poor’s.

Miguel Angel Gadea, head of funding at Cajas Rurales Unidas (Cajamar), spoke to The Cover on Wednesday, following its debut deal as a merged entity. Cajamar, which plans to be a regular issuer, has grown deposits, expects to raise its core capital ratio this year and aims to stabilise its ratio of non-performing loans with a proactive approach to servicing.

Norway’s central bank plans to continue excluding covered bond mortgage subsidiaries from using its lending facility and says the level of asset encumbrance should be linked to the cost of deposit insurance. Analysts said that the news was disappointing for the covered bond market.

Australia’s Suncorp Bank has gone ahead with a A$750m (€581m) new issue from its Apollo RMBS platform in a deal that will target heavy allocation to UK investors.

The provision for loan-to-value disclosure in proposed changes to the German Pfandbrief Act are credit positive, said Fitch on Wednesday. But the provision of whole loan LTV disclosure would be better as it would give investors a clearer picture of default risk.

Cajas Rurales Unidas (CRU) accessed capital markets for the first time on Tuesday, bringing a €500m three year covered bond. Price discovery was tricky, given the absence of liquid comparable deals.