Covered Bonds

Caisse de Refinancement de l’Habitat (CRH) issued its second chunky Swiss franc covered bond in three months on Wednesday, a Sfr375m dual trancher, bringing its 2012 supply in the currency to Sfr1.025bn.

Dexia Kommunalbank Deutschland (DKD) on Monday announced the second public sector covered bond buyback in as many weeks, as German issuers seek to rid themselves of unwanted public sector assets.

Global Bank is on the road with Deutsche Bank, marketing a structured covered that will be over-collateralised by dollar denominated residential mortgages, with additional security in the form of recourse to the issuer.

Nordea Bank Finland launched a blow-out benchmark covered bond on Wednesday, offering buyers only the second opportunity of 2012 for Finnish exposure in the covered format.

Nordea Kredit Realkreditaktieselskab (Nordea Kredit) announced an auction of three year Danish covered bonds on Thursday, a day after the Nordea Group’s Finnish arm launched its second jumbo covered bond of 2012.

Rising unemployment in Spain could hit residential mortgage portfolios, JP Morgan analysts have warned. An increase in non-performing loans would affect Spanish cover pools, while a lack of adequate measures to deal with mortgage losses means subordinated bondholders could be called on to provide additional capital.

Caisse de Refinancement de l’Habitat (CRH) issued its second big Swiss franc covered bond in three months, a Sfr375m dual trancher, bringing its 2012 supply in the currency to Sfr1.025bn.

The evolution of mortgage funding in the UK market has led to some convergence of RMBS and covered bonds as both markets compete in the three year floating rate space. With investors expected to favour secured instruments and issuers seeking innovative ways to address funding and rating challenges, the UK experience might prove to be a foretaste of things to come in Europe as a whole, The Cover argues.

Skipton, Coventry and West Bromwich building societies have recently priced or are marketing UK RMBS deals. The funding levels are close to each other and are not much more expensive than what could have been achieved in covered bond format.

Further credit rating agency and roadshow details have emerged on the inaugural covered bond deal from Latin America. Global Bank’s transaction is notable for its soft bullet structure and its loan assets. Half of these loans qualify for preferential interest rate subsidies and their payment is deducted directly by employers from employees’ pay checks.

Increasing encumbrance on bank balance sheets could become an “arms race spiral” of even greater encumbrance, risking financial stability, the Bank of England’s Andrew Haldane said in comments released on Tuesday.

Long gone are the days when Cédulas and Pfandbriefe traded within a few basis points of each other and no one could conceive of a covered bond default. Today that prospect is only as remote as a sovereign default. So spare a thought for investors who have no way of hedging their risk.