Covered Bonds

Bank of New Zealand has released half year financial results, drawing attention to the Australasian market, raising questions over the fate of Westpac New Zealand’s postponed, euro covered bond.

Market participants anticipate two new issues on Wednesday, though the primary market remained quiet on Tuesday. WL Bank mandated for a euro mortgage backed transaction with a five year maturity, and Dexia Municipal Agency is expected to bring its public sector backed Obligations Foncièrs after publishing its results on Wednesday morning.

Moody’s placed Banca Popolare di Milano’s covered bonds on review for possible downgrade on Monday, because of a corresponding rating action taken on the bank itself.

Amid growing concern over peripheral euro sovereigns, covered bond analysts are focusing on the exposure to the troubled periphery of public sector cover pools in core jurisdictions.

The drive for a minimum covered bond transparency standard looks set to continue for a while yet. After the European Covered Bond Council met the ECB in Frankfurt on April 26, the technical issues working group is due to meet on May 27. They will present a refined list to the ECBC’s steering committee which is looking for a middle way that appeases investors, the ECB and issuers. For the UK market, collateral transparency is unlikely to be a problem, but misguided views on what happens after a UK issuer’s insolvency illustrates opacity is still an issue

Credit Suisse has hired Sabine Winkler from Bank of America Merrill Lynch — ending its long search for a covered bond research analyst. She joins the firm on June 1 as part of a slightly larger and well established name in the covered bond market. Credit Suisse is 10th in the all covered bond league table in the year to April 26 (see here for more). BofA Merrill ranks 20th in the same table.

Primary market activity was confined to a lone mandate from Dexia Municipal Agency on Monday, though issuers across core Europe are watching the market closely, said syndicate officials.

All Portuguese benchmark deals now trade inside government bonds.

The US House Financial Services Subcommittee has approved the Covered Bond Act 2011. The bill contains new amendments that strengthen and protect investors’ rights. Critically, investors, and not the Federal Deposit Insurance Corporation, continue to have a priority claim on the cover pool assets — both eligible and ineligible. The modified bill is now ready to proceed to the next stage.

These charts and tables provide an overview of all benchmark covered bond issuance from January-April 2011, breaking down total supply by country, currency, and maturity, and comparing this year's volumes with those of previous months and years.

These charts and tables provide an overview of covered bond issuance from January to April 2011 , breaking down total supply by country, currency, and maturity, and comparing this month's volumes with those of previous months and years.

April was the first month without record issuance, and the first in which total supply was less than that of the previous year. Deutsche Bank analysts report that year to date supply of euro benchmarks remains at a clear historical high however, with public issuance from the UK also at record levels. Borrowers from Norway and Spain, among others, have been suggested as likely candidates for next week, and though no mandates have been announced, syndicate officials said the market remains open for peripheral and core names alike.