Covered Bonds

Moody’s downgrade of Portuguese sovereign debt on Tuesday night wiped out the burst of market optimism that had followed last week’s approval of Greece’s austerity package. In the Swiss franc market, the result was a sustained drop in mid-swap rates and absolute yields.

Finland’s OP Mortgage Bank issued a seven year covered bond last Friday. Although the borrower managed to raise Eu1bn of funding, the order book fell just short of this level, highlighting the fact that deal was far from easy.

Moody’s maintained ratings pressure on core jurisdictions this week, announcing on Wednesday that covered bonds of certain German Landesbanken were under review for possible downgrade. The uncertainty was enough to prompt Bayerische Landesbank to postpone a benchmark transaction earmarked for the same day.

Moody’s has downgraded BRFkredit’s senior unsecured rating from Baa1 to Baa3 and cut the rating of bond bonds issued from its Capital Centre E from Aa1 to Aa2.

Fitch downgraded Spanish issuers Bankinter and Banco Popular Español on Wednesday. Bankinter was cut from A to BBB+, on stable outlook, and Fitch has now withdrawn all ratings assigned to the borrower. Banco Popular Español was lowered from A- to A, on negative outlook.

Though the covered bond market remained quiet on Thursday, syndicate officials stressed it had not yet closed for summer. Investors still have cash to put to work, and there is at least one trade expected next week. Negative rating action has damaged market sentiment, however, and closed the window for some peripheral names. Prospective issuers face a forbidding market and increased premiums should they decided to issue.

Most German covered bond investors prefer maturities of five years or less, while liquidity and ratings remain important to them, a new DZ Bank survey has revealed.

Most German covered bond investors prefer maturities of five years or less, while liquidity and ratings remain important to them, a new DZ Bank survey has revealed.

Japanese bankers are trying to convince politicians in the country to write a covered bond law. If that happens, they hope to launch the first deal before the end of next year. But these will be covered bonds with a difference: loans to public institutions are likely to be much more prevalent than mortgages in the cover pools.

In response to a downgrade by Moody’s, BRFkredit will open a new covered bonds capital centre and begin dialogue with Standard & Poor’s regarding the rating of the borrower’s other capital centres, according to Carsten Tirsbæk Madsen, executive vice president of BRFkredit.

The Cover would like to draw up a shortlist for our annual awards. We invite bank arrangers to nominate their first and second choices for best deal of the year, best dollar deal of the deal of the year and best non-core currency deal of the year.

Crédit Mutuel CIC launched its debut Obligations à l'Habitat on Tuesday, taking supply in the new French format since last Friday to Eu3.8bn. The borrower managed to find a secure window for issuance in a market plagued by negative rating actions to print a benchmark deal in line with its own curve, and that of the wider French market.