Covered Bonds

Standard & Poor’s affirmed Alpha Covered Bond programme at A-, on negative outlook, on Wednesday, and removed it from CreditWatch negative.

The oversight body of the Basel Committee on Banking Supervision has ruled that covered bonds are eligible for the new regulatory liquidity buffers, subject to 15% haircuts and other restrictions, under an agreement reached Monday.

Banques Populaires yesterday (Wednesday) priced a Eu340m increase to a 2.625% June 2015 covered bond at 50bp over mid-swaps, in line with guidance.

The European Central Bank is moving structured covered bonds from category IV to III of its collateral framework, meaning that they will have more lenient haircuts.

The House Financial Services Committee passed the United States Covered Bond Act of 2010 yesterday (Wednesday) in a quick markup after some concessions were made to the Federal Deposit Insurance Corporation. However, a compromise over how overcollateralisation should be treated has not yet been reached.

Moody’s yesterday (Wednesday) downgraded covered bonds of four Portuguese banks because of the negative impact on its expected loss analysis of downgrades of the issuers.

Canadian Imperial Bank of Commerce took its covered bond funding in the US market this year to $4.25bn (Eu3.27bn/C$4.39bn) yesterday (Tuesday), increasing its two outstanding 144A issues by a combined $1bn. Meanwhile, French taps in euros continued with Banques Populaires Covered Bond.

The transfer of CajaSur’s assets and liabilities to Bilbao Bizcaya Kutxa will have a positive effect on the multi-cédulas exposed to CajaSur, and a neutral impact on those exposed to BBK, Fitch said today (Wednesday). The multi-cédulas are among 48 on Rating Watch Negative, which Fitch aims to resolve in the next two months.

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.