Covered Bonds

Moody’s has upgraded Caisse Francaise de Financement Local’s covered bonds to Aaa from Aa2, following a similar move by Standard & Poor’s. The upgrade came after all three major rating agencies rated CFFL’s holding company, Société de Financement Local (SFIL) double-A. CFFL’s previous owner Dexia Credit Local was rated Baa2.

Fitch placed SNS Bank's mortgage covered bonds' AA+ rating on Rating Watch Evolving (RWE) on Wednesday, a day after revising its outlook on Netherlands from stable to negative. Despite this, SNS bank’s covered bonds have rallied strongly since last Friday and have the potential to perform further.

Norwegian banks that follow Basel III’s internal rating based (IRB) approach will be able to hold less capital for residential mortgage loans than they do currently — contrary to reports elsewhere.

The touted acceleration of the bail-in timetable for senior unsecured debt holders by three years to 2015 would cause senior unsecured spreads to widen relative to covered bonds, tilting supply back in the covered market’s favour. However, such action would undermine the fragile confidence in peripheral banks.

Plans to amend Spanish mortgage law will hit covered bond investors and could limit credit flow into the country, Moody’s warned on Monday, as they will weaken lender recourse to borrowers, and lower the level of over-collateralisation.

There has been modest selling of Cédulas on Monday, on the back of weakness in Spanish government bonds. Meanwhile, recently issued covered bonds from the core, many of which were priced flat to their borrowers’ curves, are treading water, said bankers. Despite that, they hope Scandinavian banks, now out of blackout, may bring deals this week.

The European Covered Bond Council’s Label Initiative already covers more than half the market, but more work is needed, according to ECBC head Luca Bertalot. Pfandbriefe remain a glaring absence.

Patrick Steeg is stepping up to be head of debt capital markets at Landesbank Baden-Württemberg, with Günter Gleumes moving to be head of corporate sales and securitisation, The Cover understands.

Patrick Steeg is stepping up to be head of debt capital markets at Landesbank Baden-Württemberg, with Günter Gleumes moving to be head of corporate sales and securitisation, The Cover understands.

The decline in the proportion of covered bonds rated triple-A may be flattening out, Moody’s data shows. However, Standard & Poor’s put €69bn of multi-Cédulas on credit watch negative on Thursday, while SNS Bank and Monte dei Paschi di Siena covered bonds are also feeling downward pressure.

Spanish banks dominated covered bond supply in January, as French issuers swapped to senior unsecured for early year funding.

Fears that subordinated creditors to SNS Bank would be subjected to harsh burden-sharing measures eased this week as talk of a private recapitalisation picked up. But the uncertainty drove sharp moves in the bank’s subordinated debt.