Covered Bonds

Two French covered bond issuers have very different outlooks for 2013, with Dexia Municipal Agency on an upward path, while Compagnie de Financement Foncier (CFF), until recently by far the better credit, faces severe disruptions because of ratings uncertainty. Traders believe the spread differential for the two issuers is likely to converge this year and may even cross over.

Caisse de Refinancement de L’Habitat (CRH) has mandated leads for the first covered bond deal of 2013, a 12 year benchmark. But despite record covered bond redemptions this month which should theoretically be positive for supply, bankers are not getting too excited.

The ECBC’s new Label initiative became effective on January 1. It sets out minimum standards for transparency. However those standards fall short of investors’ requirements and Canada has already set the bar higher. The Label’s definition of a covered bond also excludes bonds that are likely to be less vulnerable to ratings volatility.

Caisse de Refinancement de L'Habitat (CRH) has mandated leads for the first covered bond deal of 2013, a 12 year benchmark.

Two French covered bond issuers have very different outlooks for 2013, with Dexia Municipal Agency on an upward path, while Compagnie de Financement Foncier (CFF) faces rating uncertainty, which it hopes to resolve soon. Traders believe the spread differential for the two issuers is likely to converge this year and may even cross over.

Canada Mortgage Housing Corp’s (CMHC) new covered bond guidelines have a host of investor friendly attributes but will also raise credit and market risk in borrower programmes, according to Moody’s.

Italy’s covered bond market will tread water in 2013 in terms of outstanding bonds, say analysts. Issuers remain at the mercy of their sovereign story and a tricky general election is due in the first quarter, but supply could surge if the outlook improves.

Net supply of Spanish covered bonds will fall by €30bn next year as the country’s mortgage market continues to contract and the issuance environment remains challenging, analysts predict. But an improvement in the outlook could prompt a big leap in issuance.

Denizbank is the latest Turkish issuer to turn to covered bonds. It has applied for permission to raise up to €300m in SME-backed bonds, which it intends to sell early next year.

BRE Bank Hipoteczny hopes to bring its first public euro covered bond aimed at the international market next year, treasury director Pawel Lopuszynski has told The Cover. The Polish mortgage lender has been holding off on the deal to make sure it will be ECB eligible.

DenizBank has become the latest Turkish issuer to turn to covered bonds. The borrower has applied for permission to issue up to €300m of bonds backed by loans to small and medium-sized enterprises, which it intends to sell early next year.

Norway’s Finance Ministry wants to limit the amount of assets banks can use for covered bond issuance, and could prevent those issuers from taking retail deposits, according to letters published on Wednesday. The ministry of Finance will also consider granting a banking license enabling banks to access central bank funding.