Covered Bonds

La Caixa built a modestly oversubscribed order book for a Eu1bn three year public sector-backed deal yesterday (Tuesday) that has been the only benchmark covered bond issuance so far this week, with the pace of supply slowing markedly in comparison with previous weeks.

Moody’s has upgraded covered bonds issued by Kookmin Bank from Aa2 to Aa1 after last week raising South Korea’s rating and then the issuer’s.

Changes being made to covered bond structures and overcollateralisation levels were among various reasons cited by Standard & Poor’s yesterday (Monday) for keeping 41 programmes on review beyond an initially targeted deadline of last Friday. The rating agency aims to conclude the review of the remaining programmes, which include all Irish, Swedish and US covered bonds it rates, by 16 June.

Commerzbank has hired Nikolaus Giesbert from Morgan Stanley to head its fixed income and currency sales business globally.

La Caixa launched a three year public sector covered bond this (Tuesday) morning at levels wider than those discussed last week to take into account an underperformance of Spanish government bonds since then. Only one publicly announced mandate remains in the pipeline, with volcanic ash potentially disrupting preparations for further supply.

La Caixa is expected to launch a cédulas territoriales transaction tomorrow (Tuesday), with benchmark covered bond issuance absent so far today in markets where risk appetite has reduced, partly unsettled by the levelling of fraud charges against Goldman Sachs.

Standard & Poor’s removed 10 covered bond programmes from review after affirming their ratings at AAA on Friday, but downgraded five programmes and these remain on review. The actions were taken on the last day of a four month period by the end of which S&P said it aimed to have resolved all 98 ratings it placed on review in December after introducing a new methodology.

Compagnie de Financement Foncier priced a $2bn three year obligations foncières issue yesterday (Thursday) and achieved a long-held goal of accessing the US investor base by selling it 62% of the new covered bond.

Settlements of Iberian issues last Friday (9 April) and yesterday (Thursday) coincided with the only above average reports of covered bond purchases this week, as a brief slowdown in eligible issuance ahead of the Easter weekend kept the European Central Bank’s tally down in the interim.

Intesa Sanpaolo yesterday (Thursday) launched the first benchmark off its public sector covered bond programme, a Eu2bn seven year deal that surpassed the size initially targeted by the issuer, and will now focus on readying a mortgage-backed programme for issuance in the coming months. Meanwhile, Caisse de Refinancement de l’Habitat added Eu800m to a 3.75% 2020 issue and La Caixa today announced a mandate.