Covered Bonds

Finland’s OP Mortgage Bank has closed books on the second Finnish covered bond of 2011, a Eu1bn five year benchmark deal, on Wednesday.

Other buy-side institutions on Wednesday responded to M&G which earlier in the week argued that some covered bond collateral pools are impossible to analyse. Investors, spoken to by The Cover said that in principle they agree with M&G, but make the point that relative value also plays a key role — particularly in the case of Spain. Structure is also crucial. Bonds issued from the most traditionally revered structures that utilise specialist banks, such as Obligations Foncières, closely resemble RMBS — but without structural protection or transparency, they said.

AXA Bank Europe will price a Eu500m no grow issue at 63bp over mid-swaps later on Tuesday, via leads Bank of America Merrill Lynch, BNP Paribas, Crédit Agricole, HSBC, Natixis, and Société Générale.

Banco Espanol de Crédito sold a Eu600m no grow issue off the back of one of the borrowers largest ever order books on Monday.

Banco Bilbao Vizcaya Argentaria priced the lowest yielding covered bond from a Spanish issuer in the last year on Monday.

The debate around cover pool transparency has once again reared its head after M&G Investments warned that “not all covered bonds are alike and while some are exceptionally strong, the opaque structure of many others could harbour unwelcome surprises for investors.”

The stream of Scandinavian borrowers pricing US dollar denominated covered bonds is continuing, as Moody’s assigned a rating to a Nordea’s new programme and Swedbank priced a dual tranche deal. Other Scandinavians are set to follow.

Deutsche Bank, JP Morgan and Royal Bank of Scotland will sell Northern Rock’s first public post-crisis securitisation, a £1.5bn prime RMBS. The deal will be issued through Gosforth Funding 2011-1, which will be a standalone static pool deal.

Twin Spanish mandates in four year maturities from Banco Bilbao Vizcaya Argentaria and Banco Espanol de Credito, opened the market on Monday, after a week with scant primary activity, though strong secondary trading in cédulas.

Crédit Agricole is about to publish a recent roundtable on the emergence of the new Obligations à l’Habitat law in the evolving French home loan refinancing market. Rating agencies, issuers and investors were among the 12 panellists who discussed the main features of the law and the benefits that it is expected to usher in.

The torrent of Spanish issuance so far in 2011 has confounded many analysts’ estimations. They predicted it would begin in earnest after Q1, as Spanish covered bond redemptions will reach a record high of Eu22.4bn this year, with the majority occurring in the second and fourth quarters.