Covered Bonds

The risk profile of Danish agricultural loans is putting pressure on the country’s borrowers and their covered bonds, Moody’s said on Wednesday. Standard & Poor’s added to the gloom, reporting that Danish banks were vulnerable to a rise in interest rates, which would be particularly painful for the agricultural sector and could hamper the banking system’s recovery.

This week’s shocking suspension of Caisse Centrale du Crédit Immobilier de France’s covered bonds from Euronext and the Luxembourg stock exchange has left capital market participants bewildered and angry.

Core and non-Eurozone covered bond supply remains in high demand, with France’s Caisse de Refinancement de l’Habitat the most likely candidate to slake investors thirst for issuance.

Covered bond legislation was introduced into the New Zealand parliament on Thursday. The new law, which should be in place by the end of this year, will establish a register for covered bond programmes and require an independent cover pool monitor.

Covered bond legislation was introduced into the New Zealand parliament on Thursday. The new law, which should be in place by the end of this year, will establish a register for covered bond programmes and require an independent cover pool monitor, The Cover understands.

France’s Caisse de Refinancement de l'Habitat has held back its possible deal after the market weakened and uncertainty continued over the trading suspension of CIF Euromortgage’s covered bonds. As parent company 3CIF’s silence over the suspension stretched into its third day, one banker told The Cover the lack of communications with investors was “a disaster”.

Suspension of trading in 3CIF bonds has led to speculation that the borrower, which faces imminent multi-notch downgrades from Moody’s, has wholesale funding difficulties. It could now be forced to merge with another larger entity, such as Banque Postale, bankers told The Cover.

The risk profile of Danish agricultural loans is putting pressure on the country’s borrowers and their covered bonds, Moody’s said on Wednesday. Furthermore, Standard & Poor’s reported that Danish banks are vulnerable to a rise in interest rates, which would be particularly painful for the agricultural sector and could hamper the banking system’s recovery.

Non-Eurozone supply remains in high demand, but Caisse de Refinancement de l'Habitat (CRH) could be the first core European name to test the water this week, syndicate bankers told The Cover.

The Spanish covered bond market has reacted stoically to the government’s pledge to support Bankia. Spanish government bond yields are steady, as are its Cédulas. But covered bond investors, who sit at the top of the capital stack, are concerned that the central bank has subordinated them.

Länsförsäkringar Hypotek became the first Nordic issuer to tap the Swiss franc market in covered bond format this year when it priced a Sfr175m seven year note on Thursday. However, with pricing still not meeting larger Nordic financials’ targets, market participants do not expect a flurry of covered bond supply out of the region to follow.

With asset encumbrance fears hanging over the covered bond market and heavy handed regulation in the form of Solvency II threatening to kill off the RMBS market, mortgage funding is under pressure like never before. But a third way might be emerging, in the shape of whole loan sales.