Covered Bonds

French guaranteed home loans, which make up the majority of the country’s housing loan market, could potentially face systemic pressure given provision is made by less than a handful of private companies. But Moody’s says such risks have been factored into its analysis, and in any case, should any of the insurers get into difficulty, the state would almost certainly step in to support the market.

Euro benchmark covered bond issuance since August fell by a third compared with the same period last year, but a look at the redemption calendar for this quarter and the first quarter of 2012 shows that funding pressures will not wait for Europe to fix itself. The new ECB purchase programme (see separate story) may help some borrowers plug funding holes, but with only €40bn at its disposal, not all issuers will be able to rely on it for refinancing.

In what it told EuroWeek was an "intentional" ambiguity, the European Central Bank has failed to spell out how it will deploy its second covered bond purchase programme.

The covered bond market has not reacted to the European Central Bank’s announcement detailing the second covered bond purchase programme (CBPP.2). A spokesperson for the ECB told The Cover that it was intentional not to respond to the most crucial question that the market had wanted answered.

The covered bond market has not reacted to the European Central Bank’s announcement detailing the second covered bond purchase programme (CBPP.2). A spokesperson for the ECB told The Cover that it was intentional not to respond to the most crucial question that the market had wanted answered.

Australian covered bond issuers ANZ and National Australia Bank are a step closer to execution after receiving expected triple-A ratings on Thursday. NAB has enjoyed positive feedback on its roadshow, which finishes on Friday, and could be ready to announce a deal at the start of next week.

Activity in the secondary market has been focussed on France where several banks report Street and real money interest – even as the French government bond spread to Germany hit new spread wides. Meanwhile, syndicate officials cast doubt on whether the ECB’s purchase programme will materially benefit Italy and Spain.

Euro jumbo issuance since August fell by a third compared with last year, but a look at the redemption calendar for this quarter and the first quarter of 2012 shows that funding pressures will not wait for Europe to fix itself. The ECB purchase programme may help some borrowers plug funding holes, but with only €40bn at its disposal, not all issuers will be able to rely on the ECB to refinance assets.

Moody’s cut SBAB’s issuer rating from A1 to A2 on Wednesday, because of challenges to the bank’s standalone creditworthiness due to low profitability, a concentrated and unseasoned loan book, and an almost total reliance on market funding.

The ECB’s quest to bring loan-level disclosure to the European ABS market moved forward on Tuesday, with technology and data firm Sapient Global Markets appointed to build the database providing loan-level data to the market. The announcement comes as covered bond borrowers grapple with the provision of far less onerous transparency initiatives being demanded by investors.