Covered Bonds

Portuguese banks, with Eu13bn of bonds maturing in 2011, are fast approaching the first anniversary since any of their number last sold a benchmark bond, causing consternation among bankers and putting the spotlight on the European Central Bank ahead of a potential tightening in its provision of liquidity.

ING Bank took advantage of the quietest week of the year, attracting exclusive investor attention on Thursday for a Eu2bn five year Dutch covered bond.

Following in the wake of Nationwide and Lloyds TSB, Abbey National Treasury Services became the third UK issuer to take advantage of domestic demand for sterling-denominated long dated residential mortgage-backed covered bonds.

The books on ING Bank’s five year covered bond closed at 11:45am UK time. Being the only deal in the market gave it exclusive status and it drew Eu2.25bn of orders from over 100 accounts.

Moody's on Thursday revealed its updated approach to analysing set-off risk in Italian structured finance and covered bonds transactions and said that there will be no rating actions following the implementation of its revised methodology.

Spanish and Italian covered bonds are still attracting solid demand, and even multi-cedulas deals are performing. However, the small number of deals outstanding in Portugal makes it very difficult to draw any conclusion on the outlook which, along with Ireland, seems less certain.

Italy’s Banca Carige today announced the mandate for its first deal of the year. ING is taking IOI's for a Dutch five year, to be launched tomorrow. Bankers speculate that Westpac’s postponement of its inaugural euro benchmark on Tuesday may have been due to reasons other than those the bank and its lead managers gave. More mandates should follow in March but the yield back-up means long-end demand is not so robust.

Abbey National sold a £1bn 15 year benchmark on Monday in a deal that was more than twice oversubscribed and tightened strongly after pricing.

Westpac New Zealand postponed its inaugural euro benchmark covered bond on Tuesday, following a devastating earthquake in the south of New Zealand.

Portuguese banks, with Eu13bn of bonds maturing in 2011, are fast approaching the first anniversary since any of their number last sold a benchmark bond, and bankers said this week that discussions with investors have ended in disagreement over price.