Covered Bonds

Italian issuers are braced for another round of covered bond rating cuts after Moody’s lowered Italy’s government bond rating on Friday. The last of the country’s double-A bonds will fall to single-A as a result, leading to harsher regulatory treatment and a reliance on credit investors, said analysts.

This week’s first ever Pfandbrief backed by aircraft mortgages has been warmly received. But amid the fanfare for the issuer, NordLB, there are concerns over the security of the assets involved that in turn are stoking debate over what assets should be eligible for covered bond funding.

The proposed bail-out of Spanish banks should be good for Cédulas holders, as the draft memo between the EU and Spain specifies the loss absorbing buffer of a bank’s liability structure. However, the impaired assets that are set to be segregated are likely to shrink Cédulas overcollateralisation (OC) and exacerbate a trend that has accelerated recently due to the surge in retained issuance.

Intesa Sanpaolo created two new mortgage backed jumbo covered bonds this week as part of an exchange offer open to public sector backed bondholders, who also voted to allow the issuer to amend its public sector documentation and make existing rating triggers less stringent.

Australia’s Westpac returned to the dollar market on Tuesday, launching a dual tranche three year benchmark covered bond, which it priced without a new issue premium, according to syndicate bankers off the deal.

NordLB launched the first ever aircraft Pfandbrief (Flugzeugpfandbrief) on Tuesday, pricing a five year deal that was twice subscribed at the tight end of guidance. The transaction was almost exclusively bought by German investors, many of whom did not incur a capital charge, despite rating agency concerns over the limited data on the assets.

The Cover, EuroWeek’s sister publication devoted to the covered bond market, has changed the voting process for this year’s awards. Lead managers and issuers are required to pitch for the awards they wish to be shortlisted for.

The Australian regulator has set out its prudential standards for covered bonds, making some concessions to industry lobbying.

Sweden’s regulator wants to alter how issuers value cover pool assets and introduce regular collateral stress tests.

Australia’s Westpac returned to the dollar market this week, launching a dual tranche three year trade on Tuesday, which it priced with zero new issue premium, according to syndicate bankers off the deal.

New Irish insolvency legislation will benefit covered bonds over the long term, according to Moody’s. But as the new law will provide debt forgiveness for mortgage borrowers with unsustainable loans, it could hit Irish cover pools that boast a high percentage of negative equity loans.

Intesa Sanpaolo created two new mortgage backed jumbo covered bonds as part of an exchange offer open to public sector backed bondholders, who also voted to allow the issuer to amend its public sector documentation and make existing rating triggers less stringent.