Covered Bonds

Hopes for further covered bond issuance have been dashed by peripheral volatility centring around Italy and poor US employment figures, which have weakened market sentiment across asset classes. Prospective issuers are electing to wait, and with holidays in core Europe fast approaching, benchmark supply appears unlikely.

Covered bond research analyst Ralf Burmeister, who is currently on paternity leave with Landesbank Baden-Württemberg, is due to switch to the buy-side and will start his new role in September. His decision to leave LBBW’s covered bond research team follows the departures of former colleagues, Jan King and Florian Eichert.

Matej Chytil has joined Crédit Agricole’s covered bond trading team from National Bank of Slovakia. He is working on the Jumbo trading desk alongside Gavin Jackson and reports to Mariano Goldfischer who is head of trading at the firm.

Matej Chytil has joined Crédit Agricole’s covered bond trading team from National Bank of Slovakia. He is working on the Jumbo trading desk alongside Gavin Jackson and reports to Mariano Goldfischer who is head of trading at the firm.

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.

Prospects for Italian issuance are getting slimmer by the day. Only a couple of weeks ago Italy was widely deemed as the most viable peripheral covered bond sector, but matters couldn’t be more different today. The Italian covered bond market was pummelled as BTPs significantly underperformed the rest of Europe following several hard hitting domestic events.

Crédit Mutuel CIC tapped the market for the second time this week on Friday, and Hungarian issuer OTP Mortgage Bank mandated banks for its first benchmark transaction in three years. Despite renewed volatility in the periphery, syndicate officials said the covered bond market could remain open for core issuance, given strong non-farm payroll data, and a conducive yield environment.

France carried the covered bond market this week, with almost Eu4bn in Obligations à l’Habitat (OH) issued across three trading days. Germany made a brief appearance as LBBW priced its first public mortgage backed Pfandbrief on Monday, while Bayerische Landesbank postponed a benchmark Pfandbrief on Wednesday (see separate story).

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.