Covered Bonds

Spanish issuers of around Eu70bn of mortgage backed covered bonds are likely to face refinancing challenges as the cédulas fall due in the next two years, in particular if the European Central Bank reduces its liquidity support, Moody’s warned this week.

Moody’s today (Thursday) indicated that the long term debt ratings of Bank of Ireland, EBS Building Society and Irish Life & Permanent could end up lower than the rating agency envisaged when it placed them on review for possible downgrade on October 6.

Finland’s Sampo Housing Loan Bank launched a Eu1bn five year benchmark on Thursday, its first covered bond since being acquired by Danske Bank in 2006 and the third Finnish euro issue to hit the market this month. Meanwhile Germany’s DVB Bank has sold its first publicly placed ship Pfandbrief and Dexia Municipal Agency is preparing to meet Australian investors.

Credit Suisse raised Eu1.25bn on Wednesday through its first benchmark covered bond. An official at the issuer told The Cover that the funding instrument proved its worth by attracting investors new to Credit Suisse and facilitating market access despite challenging conditions.

Credit Suisse is today (Wednesday) making its debut as a standalone covered bond issuer and has attracted strong demand for a Eu1.25bn five year deal despite tight pricing and a challenging market backdrop. Germany’s DVB Bank is in the market with an inaugural ship Pfandbrief.

The covered bond market could still be open for deals from high quality issuers and solid jurisdictions, according to syndicate bankers, despite wider market conditions quickly deteriorating yesterday (Monday) over fears that political turmoil in Ireland could derail implementation of a European Union and International Monetary Fund bailout package.

*Change relative to last week. Due to technical problems, we are unable to link to this table from the homepage.

Fitch has reacted to a consultation paper from the Reserve Bank of New Zealand (RBNZ) that outlines plans for the implementation of a formal covered bond framework in New Zealand.

The pace of benchmark covered bond supply could step up a gear this week, with Credit Suisse eyeing the middle of the week for the launch of its inaugural issue, a Dutch bank said to be close to coming to market and others deciding on next steps after having finished roadshows last week. But another issuer has put primary market plans on hold until next year.

Caja Madrid achieved a 20% hit rate on a Eu16.846bn exchange offer that was closed on Friday, with new three year government guaranteed debt providing for the bulk of a maturity extension that the liability management exercise was targeting. The bank was tackling refinancing challenges that Moody’s today (Monday) said was facing Spanish issuers of mortgage backed covered bonds.

The take-up rate on a Caja Madrid and Bancaja jumbo liability management exercise released on Friday could spur on other issuers seeking to tackle their mountain of debt refinancings.

While not immune from nervousness triggered by uncertainty about the prospects and structure of a bailout package for Ireland the covered bond market this week held up relatively well, according to syndicate bankers, who attributed thinner liquidity to the approaching end of the year. A large US dollar private placement yesterday (Thursday) wrapped up sizeable new issuance in covered bonds this week.