Covered Bonds

Funding officials at French mortgage lender 3CIF have told The Cover they had no choice but to keep investors in the dark regarding the suspension of trading in the firm's debt from Euronext and the Luxembourg stock exchange just over two weeks ago.

Funding officials at French mortgage lender 3CIF have told EuroWeek they had no choice but to keep investors in the dark regarding the suspension of trading in the firm's debt from Euronext and the Luxembourg stock exchange just over two weeks ago.

During the crisis, the Nordic covered bond market firmly established its credentials as an anchor of stability, with spreads holding firm and borrowers maintaining their access to the market. Since then, continued strong demand for exposure to the region has supported a further narrowing of spreads relative to other core European covered bonds. In the EuroWeek/Natixis Nordic covered bond roundtable, a number of leading issuers from the region discussed the underlying reasons for this strength, and the outlook for the market.

Nykredit Realkredit will price a €500m five year junior covered bond at 200bp on Wednesday afternoon. The deal came far closer to senior than covered bond levels, with demand mainly from credit buyers in Nordic regions more familiar with the unusual structure.

Europe’s peripheral covered bond markets are looking over their shoulders after Fitch downgraded Banco Popular Portugal’s covered bonds on Wednesday. This followed downgrades of Greek and Cypriot covered bonds which have left their issuers unable to access emergency ECB repo funding.

Berlin Hannoversche Hypothekenbank (BHH) has issued the first €1bn mortgage backed German Pfandbrief of 2012. And even though it was not triple A rated, the deal achieved the tightest spread of any so far this year. The depth and breadth of demand it attracted not only pays testimony to the scarcity of German supply but also suggests that investors focusing more on capital preservation than on relative value.

Clydesdale Bank will meet investors in London and Scotland this week ahead of a potential sterling trade. It failed to bring an inaugural euro transaction to market last year, but now approaches an undersupplied sterling market with a bolstered balance sheet and strengthened credit story.

Moody’s and Fitch have assigned provisional triple-A ratings to Suncorp Bank’s covered bonds. The borrower is understood to be on the road this week gauging interest for a potential Australian dollar deal, and would be the first Australian bank outside the big four to launch a covered trade.

Royal Bank of Canada looks set to become the first issuer to sell a covered bond in the US as a normal public offering, after receiving Securities and Exchange Commission approval. Until now, covered bond issuers have relied on 144A documentation to sell deals into the US. By attracting greater and broader demand with a full SEC registered offering, tighter pricing and more liquidity should ensue — paving the way for others to follow.

The Label initiative will go live in the final quarter, the European Covered Bond Council confirmed on Tuesday — as The Cover reported on May 11.

The number of investors looking at buying loan portfolios is increasing, and the discounts they are negotiating are falling, according to a survey that should cheer Europe’s capital-hungry banks.

The axe of Moody’s has fallen on Cédulas as the agency continues its European wide review on financial institutions. Unlike their Italian peers, many Spanish covered bonds remain double-A rated, and all retain vital access to ECB funding while the primary market becomes ever more elusive.