Covered Bonds

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.

The European Central Bank this week passed the three-quarters mark in buying under its covered bond purchase programme, with three months left until the scheme is finishes at the end of June. The ECB in March bought the second highest amount of covered bonds in any monthly reporting period under the programme, it said yesterday (Thursday).

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With more than Eu4bn of benchmark issuance priced yesterday (Wednesday), there were no signs of the covered bond market slowing down after a record first quarter. And pricing at the tight end of guidance for three new benchmarks showed spreads holding up under the heavy supply.