Covered Bonds

DnB Nor Boligkreditt yesterday (Monday) sold the biggest five year benchmark of the year, while a Eu1bn 10 year BNP Paribas Home Loan issue attracted yield-oriented demand in a well supported covered bond market.

Fitch yesterday (Monday) downgraded mortgage covered bonds issued by Alpha Covered Bonds plc, Marfin Egnatia Bank and National Bank of Greece because of a downgrade of the Greek sovereign rating and subsequent cuts of the banks’ issuer ratings.

Dexia Municipal Agency built an order book in excess of Eu1.25bn for a five year obligations foncières issue this (Tuesday) morning, while demand for new Spanish supply was subdued. A German bank, meanwhile, is expected to firm up plans shortly that will make it the sixth issuer to tap the covered bond market this week.

Desjardins, Canada’s largest co-operative financial group, is preparing to set up a covered bond programme and Quebec’s financial regulator has outlined an initial position in relation to issuance.

Standard & Poor’s has affirmed at AAA the rating of covered bonds issued by Northern Rock (Asset Management) under its new rating methodology.

Three issuers this (Monday) morning launched or tapped benchmark covered bonds in a market buoyed by an agreement over the weekend on terms of an emergency loans package for Greece. Meanwhile, Dexia Municipal Agency has mandated for a deal that could be launched tomorrow (Tuesday).

Fifty-six covered bond programmes remain on CreditWatch with Standard & Poor’s ahead of a deadline initially set by the rating agency of this Friday for the conclusion of reviews prompted by the introduction of its new methodology. Market participants expect a concentration of rating actions in the coming days, an extension of the original deadline, and more issuers to cancel their rating contracts with S&P.

Covered bonds should be promoted as an alternative to US-style off-balance sheet securitisation in countries where the asset class is underdeveloped, the European Central Bank suggested today (Monday) in an annual report on financial integration in Europe. The ECB also gave an update on initiatives within the European covered bond market.

Fitch downgraded Alpha Bank, EFG Eurobank Ergasias and National Bank of Greece from BBB to BBB- on Friday and put them on Rating Watch negative. The rating actions were among several that followed the Greek sovereign being cut to BBB-.

A Eu1bn five year issue for Compagnie de Financement Foncier yesterday (Thursday) wrapped up a busy two days of issuance in the benchmark covered bond market, with market participants positive about the prospects for next week’s activity. An Ibercaja mandate was yesterday added to a pipeline that includes names such as DnB Nor and Helaba.