Covered Bonds

Tuesday’s downgrade of France from AAA to Aa1 was not a surprise after Standard & Poor’s earlier move. Though it did briefly put pressure on French government debt, French covered bonds were stable.

Intesa Sanpaolo has succumbed to perennial investor demand for long dated peripheral issuance from a national champion and issued a €1.25bn 10 year bond. Though the funding margin is slightly negative, it is much better than even three months ago. More importantly, the deal is remarkable for its long duration.

BPCE issued a €1bn seven year deal just a day after France was downgraded. Its defiance of convention was fully justified, said bankers, as spreads could widen in January and macro-economic challenges still lie ahead.

Given the paucity of euro denominated supply and a lack of issuer diversity, the outcome of Belfius Bank’s — and Belgium’s — first covered bond was always likely to be good. But that should not diminish the extensive efforts the issuer made to address investors’ concerns with well-orchestrated marketing.

Sanjay Sofat, regional treasurer for Lloyds TSB in New York, is returning to London to head the bank’s senior funding team.

Standard & Poor’s has dealt a blow to the Dutch covered bond market by downgrading several of its banks’ issuer ratings, chiefly because of the country’s prolonged property market correction. But the move should only have a limited effect on the Dutch covered bond market, say analysts.

Sekerbank has mandated banks for a European roadshow to gauge interest for what could be its first public covered bond. Over the last 18 months, the Turkish bank has privately placed three covered bond tranches in lira, backed by loans to small and medium-sized enterprises. But it is keen to market its programme to a broader range of investors.

Dexia’s rebranded Belfius Bank attracted a huge swell of demand from a broad span of investors for Belgium’s first ever pandbrief on Monday. Bankers said the pricing highlighted a disparity to Dexia’s French municipal agency funding arm (DexMA), which is set to become a French state agency next year and should in theory trade much tighter.

Şekerbank has mandated banks for a European roadshow to gauge interest for what could be its first public covered bond. Over the last 18 months, the Turkish bank has privately placed three covered bond tranches in lira, backed by loans to small and medium-sized enterprises. But it is keen to market its programme to a broader range of investors.

Net covered bond issuance from euro area countries will be a negative €45bn in 2013, according to Barclays research, as deleveraging and the European Central Bank’s persistent liquidity support for the banking system reduce the incentive for banks to issue.

Bank of Ireland’s return to covered bonds this week provided more evidence of the growing rehabilitation of peripheral borrowers in Europe’s capital markets. But that trend is a curious mix of the encouraging and the worrisome.

Fitch and Standard & Poor’s have given Belfius Bank’s mortgage covered bonds an expected AAA rating for up to €2bn of issuance from its inaugural €10bn programme, ahead of the Belgian issuer’s long-awaited debut covered deal, which is expected next week.