Covered Bonds

Multi-cedulas suffered a swathe of downgrades from Standard & Poor’s on Thursday, but analysts and hedge funds say that deeply discounted prices of long-dated bonds look attractive.

The fledgling US covered bond market took a big step forward this week, after Royal Bank of Canada gained SEC registration for its $12bn covered bond programme. RBC could now bring the first SEC registered covered bond before the end of August.

Deutsche Hypothekenbank became the second German issuer in a fortnight to answer the clamour of domestic accounts for covered bonds, with a tightly priced summer tap on Wednesday.

Covered bond supply in July almost sank to its record low, set in July 2005. But senior unsecured supply was 10 times greater than in the same month last year.

Covered bond supply in July was close to the record low of July 2005, and €2bn down on the previous two years, as peripheral credits remained shut out and those with access preferred to tap the senior market. As a consequence, redemptions have far outpaced supply causing a severe shrinkage in the overall market – a trend that does not look likely to change.

The US dollar covered bond market is all set for Royal Bank of Canada to issue the first SEC registered deal. But despite the promise this offers, others may not yet be ready to follow.

Deutsche Hypothekenbank became the second recent German issuer to answer domestic accounts clamouring for paper with a tightly priced tap on Wednesday. But with buyers making enquires on all core names across the curve, opportunistic extensions are an option for a wider range of names.

The stressed cover pool losses of Australia’s covered bonds are worse than those in core Europe, Moody’s first performance overview of the jurisdiction revealed on Tuesday. However, Australia still boasts highly rated issuers and impressive collateral scores.

The fledgling US covered bond market took a big step forward this week, after Royal Bank of Canada gained SEC registration for its $12bn covered bond programme. RBC could now bring the first SEC registered covered bond before the end of August.

Royal Bank of Canada has moved closer to bringing the first fully SEC registered covered bond. The deal is likely to happen in late August or early September after RBC’s $12bn covered programme became SEC registered on Monday.

RBC is poised to issue the first fully SEC registered covered bond.

Given the bid for core assets, covered bond bankers still hope for further taps during the summer holiday season, while in the secondary market, activity is focused on core jurisdictions which are largely bid only. In the periphery markets there are growing concerns that the recent rally may be close to fading.