Covered Bonds

Crédit Mutuel Arkéa overcame difficult markets to bring in €1bn of funding on Wednesday through a dual tranche tap of 3.5 and 10 year bonds. The deal attracted the first bit of purchase programme (CBPP.2) buying and its success may encourage other issuers to use lower risk taps if tricky market conditions persist over the next few weeks.

A group of four US senators from both political parties has introduced US covered bond legislation into the Senate. Bi-partisan support from the upper house is highly encouraging, and though the Federal Deposit Insurance Corp still has issues with prospective legislation, broad Congressional support could still push the bill through.

In a world echoing with cries for tighter banking regulation, Canada risks strangling one of the most promising covered bond markets through overly stringent supervision.

The euro covered bond market has begun to show signs of life, a full five trading days after the formal start of the ECB purchase programme. Crédit Mutuel Arkéa will price a rare dual tranche tap later on Wednesday.

Moody’s downgraded the long-term debt and deposit ratings of Bank of Cyprus and Marfin Popular Bank on Tuesday, and placed them on review for further downgrade.

The Australian Prudential Regulation Authority (Apra) outlined its proposals for a new prudential standard on regulations for Australian covered bond issuers on Tuesday.

While Westpac and Commonwealth Bank of Australia headed to the US on Monday to market debut covered bonds, ANZ has started meeting investors in Europe, after finishing a US roadshow last week.

The covered bond market waited in vain on Tuesday for the start of ECB purchase programme (CBPP.2) buying in the secondary market. Despite moderate sovereign tightening, peripheral covered bond spreads continued to trade well inside government bonds, particularly in Italy where it is increasingly doubtful that issuers will be able to bring benchmark deals against outstanding curves.

Westpac and Commonwealth Bank of Australia (CBA) started US roadshows on Monday and will go into investor meetings with expected/provisional triple-A ratings secured for their programmes. All four Australian banks with covered bond programmes now have provisional triple-A ratings from Moody’s and Fitch. But National Australia Bank (NAB) is winning the race to issue Australia’s first covered bond, after completing its US and European roadshow last week and mandating for a dollar transaction on Friday.

News of the ECB’s latest covered bond purchase programme has failed to move secondary spreads, analysts and syndicate officials told The Cover on Monday. Meanwhile the situation in peripheral jurisdictions continues to deteriorate, making the programme’s success all the more contingent upon concrete political resolution in the individual countries, and Europe as a whole.

In what it told The Cover was an "intentional" ambiguity, the European Central Bank has failed to spell out how it will deploy its second covered bond purchase programme. Nonetheless, bankers have welcomed the more accommodating criteria this time round — it is willing to buy smaller and longer deals with lower ratings — and expect it to buy more primary paper than before too.

The UK’s Co-operative bank has sidestepped European turmoil and swap costs by choosing to bring its inaugural 10 year transaction in sterling. After finishing a roadshow earlier in the week the issuer sold its debut benchmark at the tight end of guidance against an improved market backdrop, with an attractive new issue premium.