Covered Bonds

There will be more covered bond downgrades in 2013, Moody’s said in its global covered bond outlook, but the rate of downgrades should start to slow.

Westpac has brought its second US dollar bond of 2012 — the fifth such deal from Australian banks this year. Following a US roadshow last week, it was heavily oversubscribed and priced on Tuesday at less than half the spread of its first US deal, launched in November 2011.

The Pfandbrief market is expected to shrink by up to €27bn next year as the deleveraging of public sector businesses continues apace. Opportunistic deals should dominate in 2013, and German issuers will again look to foreign markets such as sterling and dollars.

Italian and Spanish covered bonds have retrenched some of the previous day’s gains against their respective sovereigns on Tuesday.

After nearly 30 years with Bayerische Landesbank (BayerLB), Peter Mittermayer, head of covered bond syndicate, will retire at the end of this week.

Net covered bond issuance from French borrowers will be negative in 2013, analysts expect, as the country’s mortgage market growth slows and its sovereign downgrade hangs over banks. But France will continue to dominate the primary market.

Société Générale’s Russian subsidiary, DeltaCredit Bank, is expected to place notes of its recently priced covered bond on Tuesday, its treasury told The Cover. It is expected to return with further deals next year as the Russian fledgling covered bond framework continues to restrict local issuers to their domestic market.

This week Commerzbank unveiled a highly rated SME structured covered bond. It offers tremendous hope for the revival of the European economy, as it suggests banks have a way of financing this crucial sector with capital market funding.

The development of the covered bond market took a leap forward this week when Moody’s and Fitch assigned a provisional double A rating to Commerzbank’s €5bn SME-backed structured covered bond programme.

Strong and growing demand for FIG issuance amid declining yields could help issuers from the eurozone periphery reduce reliance on European Central Bank funding, said Fitch Ratings.

BRFkredit has launched a €4bn Euro-medium term note programme with a view to tempting German investors next year with a first quarter benchmark. Until now the Danish mortgage bank had relied on domestic standalone documentation.

National Australia Bank has returned to the euro market with a covered bond that is twice as long as its previous euro financing but at less than half the cost.