Covered Bonds

The European Covered Bond Council has approved a set of standards as the basis for a European covered bond label, and is turning to the task of deciding how it will be implemented.

*Change relative to the end of Feburary

Moody’s yesterday (Wednesday) downgraded mortgage covered bonds issued by Alpha Bank and National Bank of Greece because of heightened sovereign debt risk in Greece, and affirmed the rating of those issued by Eurobank Ergasias.

A new US systems provider is set to enter the competition to become the covered bond market’s trading platform of choice, taking advantage of existing auction technologies to meet the transparency requirements being urged upon the asset class, The Cover understands.

Standard & Poor’s yesterday (Wednesday) affirmed mortgage-backed cédulas issued by La Caixa at AAA, on stable outlook, completing for the first time a review of Spanish covered bonds under its new rating methodology.

Fitch yesterday (Tuesday) revised the outlook on Banco Comercial Português and Banco Espírito Santo from stable to negative, but affirmed their ratings and those of Banco Santander Totta and Banco BPI. The rating agency has also affirmed mortgage covered bonds issued by Caixa Geral de Depósitos at AAA.

Despite having fallen short of a Eu1bn target size, Bancaja completed its scheduled benchmark funding for 2010 with the launch of a Eu750m three year cédulas hipotecarias yesterday (Tuesday), an official at the savings bank told The Cover, while other Spanish issuers have yet to access the covered bond market ahead of forthcoming maturities.

The UK government called for further work among building societies towards pooled funding models, including joint covered bonds, in a discussion paper yesterday (Tuesday). Meanwhile, the Council of Mortgage Lenders said that last week’s budget was disappointingly short on detail about government action to help securitisation and covered bond markets.

UBS this (Wednesday) morning launched a Eu1.25bn 12 year transaction that will conclude what, according to Dealogic, has been the busiest quarter in the history of the benchmark covered bond market. Meanwhile, an Austrian issuer is preparing to return to the market after an absence of almost five years.

Bancaja will size a three year cédulas hipotecarias launched yesterday (Monday) below its Eu1bn target and price it at the wide end of guidance, prompting some bankers to suggest that the transaction was a deal too far for the Spanish covered bond market. Meanwhile, UBS has mandated a new issue.

Banco Santander Totta negotiated an unexpected downgrade of its sovereign last week to price a Eu1bn three year obrigações hipotecárias issue yesterday (Monday), the first Portuguese benchmark covered bond in nearly three months.

A draft amendment to Germany’s covered bond legislation that was passed by the government last Wednesday has been welcomed by market participants because it clarifies the legal status of the cover pool and its administrator, thereby mitigating refinancing risks.