Covered Bonds

Fitch affirmed mortgage backed covered bonds issued by Caixa Económica Montepio Geral at AA yesterday (Thursday) after increasing the programme’s Discontinuity Factor following a review of the legal and regulatory framework for Portuguese covered bonds.

The UK’s Financial Services Authority is delaying phasing in liquidity requirements for larger UK banks pending finalisation of rules being developed by the Basel Committee of Banking Supervisors. The move has been interpreted as a sign that the FSA could broaden the range of assets deemed eligible for liquidity buffers, towards which covered bonds currently do not count.

While not immune from spread widening triggered by uncertainty about the prospects and structure of any external financial assistance for Ireland, the covered bond market was this week open for issuance and analysts did not appear worried that the survival of Irish covered bonds was under threat.

Demand from domestic and German investors allowed Austria’s Bank für Arbeit und Wirtschaft (Bawag) to launch a Eu500m transaction on Tuesday despite concerns surrounding the Irish sovereign making for a difficult market backdrop.

Bank of New Zealand this week became the first Australasian issuer to sell a covered bond in the euro market, pricing a Eu1bn seven year deal that helped underscore the funding instrument’s increasingly global reach.

Bank of New Zealand yesterday (Wednesday) became the first Australasian issuer to sell a covered bond in euros, and an official at the issuer told The Cover that the deal was priced well inside senior unsecured levels on the back of a “respectable” order book.

Moody’s today (Thursday) affirmed mortgage covered bonds issued by Northern Rock Asset Management at Aaa and removed them from review for possible downgrade, where they were placed in 2007.

State-owned Vietnam National Coal-Mineral Industry (Vinacomin) is planning to raise between $300m-$500m today (Friday), pushing ahead with a rare deal from the country despite a heavy slowdown in issuance this week.

In brief: Greece’s ATEbank is in the process of establishing a Eu5bn covered bond programme, an official at the bank has confirmed.

Bank of New Zealand International Funding, a subsidiary of National Australia Bank, has met with excess demand for a Eu1bn maximum seven year deal that is the first Australasian covered bond to hit the euro market.

A Eu500m five year Pfandbrief for Austria’s Bank für Arbeit und Wirtschaft (Bawag) was largely unaffected by background uncertainty about the prospects of Ireland signing up for financial assistance, although pricing ambitions were slightly reigned in, according to a syndicate official at one of the leads.

Fitch on Monday added four classes of triple-A rated multi-cédulas to a list of 48 that it has kept on negative review since placing them there in February. Five notch downgrades could follow for the majority of transactions under review in the absence of remedial action, according to the rating agency.