Covered Bonds

The transparency of the methodology of the European stress tests and the disclosure of banks’ sovereign debt exposures they brought have been hailed as positive for the financial institutions bond markets, with Spain’s Banco Bilbao Vizcaya Argentaria taking advantage of positive sentiment to launch a senior unsecured bond today (Wednesday) close to cédulas levels.

Covered bonds have been deemed eligible for new regulatory liquidity buffers, albeit subject to 15% haircuts and other restrictions, under an agreement reached by the oversight body of the Basel Committee on Banking Supervision yesterday (Monday). This, alongside delays and changes to the envisaged Net Stable Funding Ratio, could impact demand for and supply of covered bonds.

Denmark’s adjustable rate mortgage market has won a stay of execution as a result of the Basel Committee delaying full implementation of the Net Stable Funding Ratio until 2018, and the committee’s willingness to change its position on matched funding of liabilities of less than one year.

Moody’s today (Tuesday) placed on review for downgrade covered bonds issued by OTP Jelzálogbank, rated Baa1, and those of FHB Mortgage Bank, rated Baa3, because of rating actions last Friday in which it placed the financial institutions supporting the bonds on review for possible downgrade.

Banca delle Marche has set up a Eu5bn covered bond programme, according to a rating release from Moody’s.

Fitch cut mortgage covered bonds issued by Caja Madrid from AAA to AA+ on Friday and noted that the rating of Cédulas TDA 14, which is under review, is heavily exposed to Caja Madrid’s cédulas hipotecarias.

Spain’s Bankinter will today (Monday) add Eu400m to a Eu1bn cédulas hipotecarias issue first launched in March and will price the increase at a record high spread.

The House Financial Services Committee has scheduled a markup for tomorrow (Tuesday) of an amended version of the United States Covered Bond Act of 2010. The new language is understood to take into account some concerns raised by Senators who in June rejected a proposed covered bond amendment in the Dodd-Frank Act, and appears to be designed to deal with the Federal Deposit Insurance Corporation’s opposition to key provisions of the bill.

Moody’s last Friday downgraded Asset Covered Securities issued by Depfa ACS Bank from Aa2 to Aa3 because of a downgrade in the issuer’s rating from A2 to A3.

Lettres de gage publiques issued by NordLB Covered Finance Bank have been rated by a second rating agency, with Fitch on Friday assigning them a AAA rating.

Standard & Poor’s has for the first time applied its revised rating methodology to a Swedish covered bond programme, on Friday affirming at AAA mortgage covered bonds issued by the Swedish Covered Bond Corporation.

Moody’s on Friday placed on review for possible downgrade the ratings of two Hungarian covered bond issuers because it had the day before placed the Baa1 government bond rating on review for possible downgrade