Covered Bonds

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.

Bank of Ireland this week got an overwhelming endorsement from investors for its first publicly syndicated, non-government guaranteed debt since Ireland was forced to seek help from the European Union and International Monetary Fund in late 2010, writes Bill Thornhill.

Spain’s government was due to pass a decree on Thursday that would suspend evictions of homeowners in financial difficulty, as the country works on changes to its mortgage law. The effect on Cédulas performance is likely to be limited, however, given the low threshold for assistance.

Bayerische Landesbank’s decision to commit to a specific overcollateralisation for its two covered bond programmes to maintain triple-A ratings has sent a strong signal to investors that it is committed to keeping its quasi-agency status. But, in today’s regulatory environment the top rating is not economically justified, least of all in Germany where technical factors have compressed the credit curve.

Bank of Ireland’s blowout covered bond has sent a strong signal that, investors are more than willing to endorse the ACS product, after its three years out in the cold. Despite the high spread, the transaction was placed with traditional covered bond investors and provided sustainable funding for the issuer — encouraging other Irish borrowers to bring follow on deals.

DNB Boligkreditt made a surprise return to the market on Wednesday, after half a year away, issuing a smaller than usual covered bond and taking advantage of the exceptionally strong funding conditions in the long end, where supply is scarce.