Covered Bonds

Banco Santander Totta is understood to be considering whether to proceed with launching a covered bond early next week, with market participants discussing the pros and cons of issuance not only for the Portuguese bank, but also for Spanish banks that have been rushing to market.

Deutsche Postbank yesterday (Wednesday) priced the first 10 year jumbo mortgage-backed Pfandbrief since July 2009 at 18bp over mid-swaps, which is the tightest re-offer for a covered bond with that maturity since the collapse of Lehman Brothers and close to agency levels. Meanwhile, Eurohypo today (Thursday) priced a Eu500m four-and-a-half year floating rate public sector-backed issue.

Bankinter today (Thursday) launched a Eu1bn three year deal that is the seventh cédulas transaction in as many days, including taps, while a downgrade of Portugal’s rating by Fitch yesterday (Wednesday) has been an extra factor for Banco Santander Totta to consider as it approaches the market.

The German government yesterday (Wednesday) approved a draft amendment of the country’s Pfandbrief legislation that is due to come into effect at the end of October.

Cyprus’s ministry of finance and central bank are working hard to finalise covered bond legislation, an official close to the project told The Cover, but for the country’s banks progress has been frustratingly slow and any law may not be ready before the end of the European Central Bank’s Eu60bn purchase programme.

Representatives from the mortgage industry discussed the UK authorities’ approach to improving the funding environment for lenders at a conference yesterday (Wednesday) where a new industry body, the Mortgage Funding Group, was launched.

Treasury Secretary Timothy Geithner said that consideration of covered bonds would be an important part of looking at the US reform agenda during a House Financial Services Committee hearing yesterday (Tuesday).

Banco Bilbao Vizcaya Argentaria is today (Wednesday) in the covered bond market with the week’s ninth deal, after Deutsche Postbank earlier today priced a Eu1bn 10 year Pfandbrief that took supply of Eu500m-plus issues to Eu5.2bn over the first three days of the week. Meanwhile, Portugal’s Banco Santander Totta has announced plans to tap the market.

Standard & Poor’s yesterday (Tuesday) affirmed the AAA ratings of public sector covered bonds issued by Westdeutsche Immobilienbank and of mortgage covered bonds issued by Deutsche Postbank. WestImmo’s Pfandbriefe are on negative outlook as their rating benefits from the highest possible uplift from the issuer rating.

Banco Popular Español, OTP Mortgage Bank, Swedish Covered Bond Corp, and Westdeutsche Immobilienbank are all in the market today (Tuesday) with covered bonds. Syndicate officials said that the market was receptive, although only one issue has had pricing at the tight end of guidance confirmed.

The Senate Banking Committee passed the Dodd Bill yesterday (Monday) without a covered bond amendment that had been offered by Republican Senator Bob Corker, after the Republicans withdrew all their amendments and the bill was passed in a vote along party lines.