Covered Bonds

After mandating leads for a Eu1bn 10 year public sector backed Pfandbrief on Tuesday, Bayerische Landesbank said on Wednesday that it had decided to postpone the transaction because of an announcement by Moody’s on Monday that the bank would remain under review for downgrade.

The primary market has been dominated by core supply particularly weighted towards the long end, but a real test of tier two bank issuance, or tier one names from peripheral jurisdictions, has yet to be seen. The timing could be about right for UK, Spanish and Italian deals to enter the market.

Moody’s initiated or continued reviews for downgrade on 12 German banks on Monday, because of potential challenges to the banks’ relatively high systemic support assumptions, and a reluctance of some German savings banks to support their larger Landesbanken.

Finland’s OP Mortgage Bank came to market on Friday with the first seven year Scandinavian covered bond of the year, pricing a no-grow Eu1bn trade. Despite the bank’s prime Scandinavian collateral, the transaction fell just short of Eu1bn of orders.

LBBW sold its inaugural public mortgage backed transaction on Monday, the first borrower to bring a deal on a Monday morning since late March. A long awaited trade from Crédit Mutuel CIC Home Loan was also announced. Leads took indications of interest this morning for the borrower’s debut Obligations à l'Habitat, which follows BNP Paribas’ first euro outing in the OH format at the end of last week.

BNP Home Loan SFH will price its first euro covered bond under the new Obligations de Financement de l'Habitat format later today. The first benchmark deal since the Greek parliament approved austerity measures on Wednesday, BNP’s 10 year Jumbo appeared entirely unaffected by any residual market concerns, drawing Eu2.7bn of orders from over 100 accounts.

After more than a week without primary euro issuance, BNP Paribas and OP Mortgage Bank on Friday broke ranks and opened books on 10 a year and seven year deal respectively. BNP closed books on a well received Eu2bn transaction by mid-morning, while execution on OP’s Eu1bn no-grow deal was less straightforward.

Moody's today announced senior unsecured bond downgrades for three Danish banks. As a result the over-collateralisation levels of the covered bonds issued by these banks needs to be raised to maintain current ratings. Whether or not local banks choose to keep Moody’s and post significantly more collateral is, as yet, undecided, but after Realkredit Danmark’s decision to drop the agency, it’s possible that others will follow its lead.

Following a transfer of La Caixa’s banking activities to CaixaBank, Moody’s has assigned a Aaa rating to mortgage backed covered bonds now assumed by CaixaBank.

After more than a week without primary euro issuance, BNP Paribas and OP Mortgage Bank on Friday broke rank from the sidelines and opened books for 10 year and seven year deals respectively. BNP Paribas had closed books on a well received Eu2bn transaction by mid-morning, while execution on OP’s Eu1bn no-grow deal was less straightforward.