Covered Bonds

High foreign ownership of Cédulas, twinned with prospective rating downgrades that would push deals below investment grade, ­is becoming a bigger concern to analysts. With banks reducing their balance sheets, investors will need to consider other ways of hedging their exposure.

A group of investment banks active in the covered bond market have pledged their support to the European Covered Bond Council's (ECBC) label initiative by allowing issuers to offset the cost of the label against fees to lead managers.

The results of stress tests conducted by consultancies Oliver Wyman and Roland Berger on Spanish banks are unlikely to improve sentiment on Spanish Cédulas, analysts said on Friday.

The Association of German Pfandbrief Banks (vdp) has responded to Moody’s assertion that its latest transparency initiative has shortcomings. The rating agency said plans to factor sovereign risk into public sector cover pool calculations do not take into account duration risk. But the vdp claims its proposals are already more conservative than those suggested by Moody’s.

Virgin Money is planning to meet accounts next week to discuss a sterling RMBS from its Gosforth prime RMBS programme. At the same time Dutch issuer, Achmea Hypotheekbank, has hired Barclays and Rabobank as lead managers for a new prime RMBS.

Spanish covered bonds are set to lose the support of bank treasuries and insurance buyers as looming downgrades trigger higher capital charges and risk weightings.

The South Korean Financial Services Commission (FSC) plans to have draft covered bond legislation ready by July and submitted to parliament in November, according an FSC statement on Wednesday.

The South Korean Financial Services Commission (FSC) plans to have draft covered bond legislation ready by July and submitted to parliament in November, according an FSC statement on Wednesday.

Nordic holidays, Spanish auctions and sovereign volatility have put the brakes on primary activity in covered bonds but expectations for next week are better. Just one small Swiss covered bond was issued on Thursday.

There has been plenty of interest in core and even peripheral names in the secondary market this week, especially at the long end, where investors have been tempted by juicy Spanish yields. A briefly negative basis in covered versus CDS spurred interest.

Norddeutsche Landesbank (NordLB) is due to commence roadshowing the inaugural Aircraft Pfandbrief next week. The deal should attract interest from local second and third tier investors in NordLB’s network thanks to the winning combination of a very attractive spread at a low risk weighting. In contrast with ship Pfandbriefe, this asset is more liquid and offers better security.

Spanish covered bonds are set to lose the support of bank treasuries and insurance accounts due to ratings triggers. As a result Spanish issuers face a world of credit buyers and senior level spreads as the Cédulas sector slides towards single-A, Crédit Agricole said analysts on Wednesday.