Covered Bonds

In a further demonstration of the domestic bid for sterling denominated UK assets, Yorkshire Building Society will price a £750m seven year UK regulated covered bond at 153bp over Gilts, the tight end of 155bp area guidance. La Caixa on the other hand has postponed its deal amidst claims that the price whisper was too tight.

Ulrike Hock has joined UBS as a covered bond analyst. Prior to joining UBS last Friday [March 31] Ulrike had worked for over 10 years with one of the largest covered bond investors in Europe, MEAG, where she had worked as portfolio manager and analyst.

Irish covered bonds continue to look attractive in the secondary market, according to Deutsche Bank research, offering a pick up over those from Portugal. Covered bond traders, however, said the focus could shift soon towards Portugal.

Primary market activity on Monday was restricted to a Eu700m tap from Caisse de Refinancement de l’Habitat, which increased its 4.3% 2023 issue following strong demand for long dated French paper in the secondary market last week. Separately, the UK’s Yorkshire Building Society became the latest issuer to fill a strong domestic bid for sterling issuance.

After a slow start, the securitisation market is finally starting to show some signs of life. Rabobank, Northern Rock and Banco Popolare Vicenza are currently lining up with prime RMBS deals. In many cases the mooted funding levels they expected to achieve are not too far away from covered bonds and with the generally more transparent RMBS market also exempt from bail ins, the case for a more definitive return of the securitisation is now growing.

A new transparency initiative was unveiled at Thursday’s European Covered Bond Council plenary session in Stockholm. The prospective new standards will dovetail with a separate transparency initiative by the European Central Bank – potentially implying a material funding benefit for those that comply. The initiative is likely to help quell the clamour for cover pool data, raised most recently by credit intensive investors which have conspicuously swelled demand this year – as well as help investors form a view that is independent of credit ratings.

Fitch downgraded Caixa Economica Montepio Geral's outstanding mortgage backed covered bonds from AA to A, keeping them on rating watch negative, on Friday. Fitch also cut covered bonds issued by five other Portuguese banks because of a rating action on the banks themselves following a downgrade of Portugal from A+ to A on rating watch negative.

Record covered bond issuance almost reached parity with senior unsecured issuance in the first quarter of 2011, a trend that is unlikely to be reversed by demand constraints on the product, said bankers this week. But widening spreads between the products could put the brakes on.

The post-crisis Italian RMBS market took another step forward today, as Banca Popolare Vicenza named JP Morgan, Royal Bank of Scotland, UBS and UniCredit as lead managers for its Berica 9 transaction.

Aegon added another Eu100m to its Saecure 10 RMBS, which had the A1 notes almost three times covered, on Thursday morning. Leads BNP Paribas, JP Morgan, and Rabobank also tightened pricing to 5bp inside Tuesday’s guidance across both offered classes.