Covered Bonds

Favoured by analysts and bolstered by a growing domestic bid, UK covered bond issuance continues to flow in the euro space as well as in the sterling market.

Portugal’s banks, entangled with the sovereign in a spiral of ratings downgrades, are unlikely to see their funding fortunes improve with a sovereign bail-out, bankers said on Thursday.

The momentum around long dated core supply rumbles on, with Caisse de Refinancement de l’Habitat pricing a benchmark sized Eu700m 12 year tap on Monday, and Compagnie de Financement Foncier launching a Eu1bn 10 year benchmark deal on Wednesday.

Turkey’s Sekerbank is set to launch the first Turkish covered bond. Although it is backed by Turkish lira SME loans, the deal is nevertheless a genuine dual recourse instrument that is enshrined within the Turkish law. It is not only the first deal to be issued under the Capital Markets Board of Turkey law, but also the first secured deal to be backed by cashflows from existing local currency assets, rather than future receivables.

Abbey National Treasury Services has beaten Coventry Building Society to be the first to follow a highly successful seven year sterling issue from Yorkshire Building Society on Tuesday. At 10 years in maturity, Abbey’s new £1.25bn deal would, until recently, have been at the shortest end of the sterling curve.

Barclays Bank convinced more than 120 accounts to participate in a Eu1.5bn five year print on Wednesday, which leads said could have been larger, given the deal was almost 2.5 times oversubscribed.

Following positive sell-side reaction to the joint review and consultation on UK covered bond regulation by the Financial Services Authority and HM Treasury, buy-side reaction has been more measured. Investors say transparency risks being diluted over time and the current legal status of covered bonds lacks clarity. But, combined with the European investor initiative, which may have repercussions on the ECB collateral framework, it is clear that all authorities are working in favour of investors and this can only be good.

Compagnie de Financement Foncier priced a difficult Eu1bn 10 year deal on Wednesday, with market participants divided as to why the deal struggled. The jumbo benchmark was priced in line with ambitious guidance, though the slow book build was unexpected in a market primed for long dated paper from a high quality French name.

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

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

Moody’s has assigned a triple-A rating to Coventry Building Society’s £1.5bn Series 1 and £500m Series 2 covered bonds. The high amount of interest-only loans, loans to self employed borrowers and those with no income verification is offset against conservative average loan to values and high overcollateralisation