Covered Bonds

A merger of Caixa Catalunya, Caixa Manresa and Caixa Tarragona approved by the banks on Monday will create a new entity that will be the fourth largest Spanish savings bank. The transaction is the first major savings bank merger approved by the Bank of Spain and the European Commission, according to Caixa Catalunya.

Germany’s Federal Financing Supervisory Authority (BaFin) banned uncovered short-selling of euro-zone government bonds and their CDS by German banks as of midnight last night, raising fears that liquidity in covered bonds would be hit and a reopening of the benchmark market delayed.

The European Central Bank said yesterday (Monday) that purchases under its Securities Markets Programme that had settled as of last Friday (14 May) totalled Eu16.5bn, dwarfing activity under its covered bond purchase programme.

Barclays Bank plans to issue registered covered bonds off its Eu35bn global covered bond programme, the UK bank announced today (Tuesday).

Deutsche Hypothekenbank yesterday (Monday) achieved its goal of reopening the covered bond market and, according to its leads, did so without having to pay for the privilege.

Deutsche Hypothekenbank this (Monday) morning reopened the covered bond market after more than three weeks without any sizeable issues. Market participants welcomed the deal, but suggested that it was not representative of the wider situation in the market.

The ECB should on Tuesday give the first official indications of how much it has purchased under its newly launched Securities Markets Programme (SMP), which is understood to be primarily focused on government debt, but can also take in private debt securities such as covered bonds.

Hopes that benchmark covered bond issuance could restart next week have been reined in after reports that French president Nicolas Sarkozy threatened to pull out of the euro-zone contributed to renewed volatility today (Friday).

Barclays Capital has hired a new member for its triple-A strategy team, and at least three other banks are understood to be in the process of hiring credit analysts to focus on covered bonds.

Covered bond bankers are hopeful that the primary market will reopen next week, with Eurosystem buying of government bonds having succeeded in improving the market.

Standard & Poor’s has released the latest version of its Covered Bond Monitor, a tool aimed at allowing issuers to follow the quantitative analysis S&P conducts as part of its rating process. The model is for the first time internet-based.

The Association of Danish Mortgage Banks is exploring the possibility of specialist mortgage banks being allowed to meet the Capital Requirements Directive’s requirement for continuous loan-to-value (LTV) compliance by providing guarantees for the portions of loans that exceed relevant LTV limits, a measure that is currently only available to the country’s universal banks.