Covered Bonds

Landesbank Hessen-Thüringen offered investors a rare opportunity to participate in a sizeable Pfandbrief transaction and gain exposure to its credit today (Tuesday), with a Eu750m four year issue duly snapped up by accounts in a market where jumbo Pfandbriefe have been few and far between.

Standard & Poor’s downgraded mortgage backed covered bonds issued by AIB Mortgage Bank from AAA to AA+, on negative outlook, yesterday (Monday), after cutting the bank’s parent on Friday.

Standard & Poor’s downgraded Allied Irish Banks from A- to BBB+, on negative outlook, on Friday, because of a deterioration in the bank’s reputation driven by an increase in the level of capital it is required to hold by its regulator and government imposed management changes.

The covered bond market is in good condition and generally open for issuance, syndicate bankers reported today (Monday), but with no new mandates publicly announced since last Thursday a deal from Italy’s Intesa Sanpaolo was this morning the most concrete new issue project in the pipeline for the week.

The European Central Bank has introduced a rule exempting non-Ucits covered bonds from provisions prohibiting a counterparty from submitting as collateral an asset that is issued or guaranteed by itself or by any other entity with which it has close links.

Standard & Poor’s on Friday affirmed at BBB the ratings of five rated members of Hypo Real Estate group following a transfer of assets to run-off entity FMS Wertmanagement. Fitch affirmed Deutsche Pfandbriefbank but cut those of Depfa Bank plc and subsidiaries Depfa ACS Bank and Hypo Public Finance Bank.

DnB Nor Boligkreditt debuted in the US market with a $2bn (Eu1.43bn) five year issue on Wednesday that gave it tighter pricing than was available in euros, but the issuer told The Cover that strong US demand was the most pleasing aspect of the benchmark.

The first obligations foncières issued by Axa Bank Europe SCF will be backed by a Eu1.5bn senior tranche of an RMBS of Belgian residential mortgages originated by its parent, Brussels-based Axa Bank Europe. Bankers at arranger BNP Paribas said that this provided the European retail banking arm of French insurance group Axa with a sensible way of issuing in the absence of Belgian covered bond legislation.

Italy’s UBI Banca sold a Eu500m five year covered bond yesterday (Thursday) after coming up against reduced demand for obbligazioni bancarie garantite issues and for its credit following concentrated supply from the country, but nonetheless attracted quality orders, according to a syndicate banker at one of the leads.

Moody’s yesterday (Thursday) placed on review for possible downgrade mortgage covered bonds issued by AIB Mortgage Bank, Bank of Ireland Mortgage Bank and EBS Mortgage Finance. Fitch today said that a downgrade of Ireland’s sovereign rating will not have an immediate impact on its ratings of Irish covered bond programmes.

Canadian Imperial Bank of Commerce issued the first Kangaroo covered bond since March 2007 yesterday (Thursday), pricing a A$750m (Eu530m or C$748m) three year deal at 48bp over swaps, the tight end of 50bp area guidance, on the back of a book of more than A$1bn.

Nykredit Realkredit priced an inaugural Eu500m long three year junior covered bond last Friday (October 1). The funding instrument is unique to Denmark and — in the words of the issuer — represents "senior debt with a twist".