Covered Bonds

The UK Regulated Covered Bond Council has appointed Chris Fielding to a newly created role of chief industry spokesperson for the council as part of a push to promote UK Regulated Covered Bonds, it announced today (Tuesday).

Australia opened the door to covered bonds at the weekend, announcing a series of bank reforms that included a promise to amend a key law restricting the sale of covered bonds. That law enshrined the priority of depositors in a bank default — so the government pre-empted any gripes from depositors by confirming the continuation of a deposit guarantee scheme.

Moody’s on Friday downgraded mortgage backed covered bonds issued by two Hungarian banks, FHB Mortgage Bank and OTP Mortgage Bank, because it cut the sovereign’s debt rating and it considers covered bondholders to be exposed to “significant” refinancing and foreign exchange risk.

Moody’s on Friday placed on review for possible downgrade covered bonds issued by five Portuguese issuers after placing the issuers’ ratings on negative review the day before.

Moody’s placed Portugal’s covered bond issuers on review for possible downgrade yesterday (Thursday) because of their high reliance on central bank liquidity, the potential impact of planned austerity measures by the Portuguese government, and a more uncertain operating environment.

Fitch today (Friday) cut Allied Irish Banks and Bank of Ireland from A- to BBB, on stable outlook, following a downgrade of the Irish sovereign yesterday.

Following a premature halt to new issuance this year, syndicate bankers expect the onset of 2011 to bring a rush of benchmark covered bond supply as issuers hasten to execute funding plans in anticipation of continued market volatility. A liquid buy-side should ensure that deals are readily absorbed - at least initially.

Fitch is reviewing its assessment of liquidity risk in covered bond programmes and the refinancing cost assumptions it applies for European mortgage cover assets, which could lead to higher over-collateralisation levels being needed to support a given rating, it said last Friday (December 3).

Syndicate bankers expect the onset of the new year to bring a flood of benchmark covered bond supply, as issuers rush to execute their funding plans in anticipation of continued volatility in 2011.

Anglo Irish Bank Corp Limited on Tuesday launched a buyback offer aimed at all remaining outstanding external covered bonds launched under a UK programme, an operation that an official at the issuer described as a "clean-up exercise".

The European Commission has launched a consultation on overhauling the Markets in Financial Instruments Directive, and is considering bringing bonds, structured finance and CDS within the MiFID framework. It could lead to the application of post-trade transparency rules across these asset classes.

Jozef Prokeš has joined BlackRock as a portfolio manager to help boost the investment management firm’s covered bond focus.