Covered Bonds

National Bank of Greece is set to increase its core tier one capital by buying back its only covered bond alongside several tier one notes in a tender operation launched on Tuesday morning.

An official at a Spanish national champion tells The Cover how he expects to fulfil next year’s funding requirement and how his plan compares with this year’s funding. He thinks covered bonds will remain in the liquidity coverage ratio and believes they may even be lifted to level one. Though the RMBS market has not made a comeback, he thinks that it might. Given the more stable secondary performance versus covered bonds, there is a case for it being included in the LCR which could help the market return.

Australia’s big four banks will look to make euro covered bond debuts early in 2012 after two underwhelming forays into the dollar market in November and a privately placed Norwegian krone transaction in early December.

The ECB’s unprecedented refinancing operation may hit covered bond supply at the short-end of the curve, but medium and long-term issuance — the mainstay of the covered bond market — could benefit from greater confidence in banks’ health, bankers told The Cover.

In a difficult year, when even Europe’s chosen investment instrument, the covered bond, struggled, new markets continued to grow. Canadian banks sold big trades with ease, US dollar supply reached record levels and covered bonds reached a new continent. All exciting developments with implications for 2012 and beyond.

Singled out for special treatment by European regulatory initiatives, covered bonds were the funding tool of choice for the region’s banks in 2011. But an escalating Eurozone crisis meant the record-breaking market entered 2012 relying on state support.

Lloyds TSB has mandated Barclays Capital, Natixis, and UniCredit, alongside itself, as leads for a euro denominated covered bond early in the new year. It will be the UK borrower’s first benchmark covered bond since March.

Eusebio Garre has decided to leave his position as head of funding at Deutsche Postbank, ending a 15 year stint at the bank.

Unless sovereign debt market volatility subsides, it seems likely that publicly placed covered bond financing could remain shut for peripheral issuers in 2012, potentially forcing Spanish and Italian banks into the same category as Portuguese and Greek banks which were unable to access the market at all last year.

New Zealand’s ASB Bank has kicked off its €7bn covered bond programme with a NZ$300m private placement, becoming the last of the country’s four big banks to issue covered bonds.

France will remain the largest source of covered bond supply in 2012, bank research analysts unanimously expect, with Obligations à l’Habitat set to continue its ascent as the dominant format for issuance. Spreads remain at historic wides, but bankers expect the French institutional bid to remain robust and issuers to capitalise — even at current levels.

In further signs that the covered bond triple-A world is shrinking, Moody’s has downgraded HSH Nordbank and Deutsche Kreditbank’s (DKB) public-sector and mortgage Pfandbriefe. Dexia Municipal Agency’s covered bonds have also lost their triple-A rating, following Moody’s downgrade of Dexia Credit Local’s issuer rating.