Covered Bonds

Fitch on 22 December downgraded SNS Bank’s long term issuer rating from A to A- and placed it on rating watch negative because of the bank’s large exposure to stressed property finance sectors, and US and Spanish real estate markets in particular. The issuer has to take remedial action with respect to its covered bond programme because of the downgrade.

Moody’s on 21 December put HSH Nordbank’s A2 rating on review for downgrade, possibly of more than one notch, because it is concerned that potential sources of external support may diminish.

Fitch on 22 December affirmed the AAA rating of DnB Nor Boligkreditt’s covered bonds and gave them an improved Discontinuity Factor after the Norwegian issuer extended the liquidity gap management period for its hard bullet bonds from six to 12 months.

Standard & Poor’s on 30 December changed its outlook on Nykredit Realkredit’s A+ rating from stable to negative because of pressures on its banking operations, but said that the asset quality of the group’s core lending business remained resilient.

Issuers are limbering up to launch the first benchmark covered bonds of 2010, with three institutions having mandated for transactions that could hit the market this week and others busy with preparations.

Moody’s has downgraded Marfin Egnatia Bank’s covered bonds and placed the rating of those issued by National Bank of Greece on review for possible downgrade because of a cut in Greece’s sovereign rating from A1 to A2. These were the only negative rating actions on covered bonds since The Cover’s last bulletin on 18 December to the best of our knowledge; we will catch up on other covered bond rating developments and related issuer rating actions tomorrow (Tuesday).

Settled purchases under the European Central Bank’s Eu60bn covered bond programme increased by Eu1.193bn during The Cover’s two week seasonal break and by a further Eu70m this (Monday) morning, taking the total to Eu28.812bn.

Fitch today (Friday) affirmed the AAA rating of Bradford & Bingley’s covered bonds, on stable outlook, based on a guarantee from HM Treasury.

Denmark’s mortgage banks have sold a record volume of mortgage bonds during the country’s traditional end-of-year auctions that are held to refinance variable rate mortgages. But very high bid-to-cover ratios suggest the large supply was easily absorbed.

Moody’s downgraded 45 series of multi-cédulas yesterday (Thursday), hitting the only segment of the covered bond market not to have faced any reviews as a result of Standard & Poor’s revised criteria, which were announced on Wednesday.

Moody’s is investigating whether a draft law being discussed by France’s parliament that provides for a 50% withholding tax on certain interest payments could adversely affect some covered bond programmes, the rating agency said yesterday (Thursday).

Moody’s has updated its approach for analysing set-off risk in UK covered bonds and securitisations, but the revised methodology will not have any rating impact on these, except for credit card master trust transactions, the rating agency said yesterday (Thursday).