Covered Bonds

A Eu500m four year mortgage Pfandbrief for Corealcredit launched yesterday (Wednesday) faced two main challenges – a non-jumbo size and a BBB- issuer rating – but, according to a syndicate official at one of the leads, these were overcome, allowing the deal to be priced at an attractive level for the issuer.

Bank of America’s covered bond programme was downgraded from Aa1 to Aa2 by Moody’s yesterday (Tuesday), after the bank decided against increasing the amount of committed overcollateralisation to a level consistent with a Aa1 rating.

Moody’s has put the deposit and debt ratings of National Bank of Greece on review for possible downgrade as part of several actions on Greek banks yesterday (Tuesday) after it put the Hellenic Republic’s A1 rating on review for downgrade.

A Eu210m increase in settled covered bond purchases under the European Central Bank’s scheme took the total to Eu20.929bn this (Wednesday) morning.

Compagnie de Financement Foncier has closed books on a Eu1.5bn long two year deal, which will be the shortest dated and tightest benchmark covered bond to be priced this year. Meanwhile, Corealcredit will shortly close books on a four year mortgage Pfandbrief, and levels wider than where a Bankinter benchmark was priced yesterday (Tuesday) are being whispered for a forthcoming Caja Madrid cédulas issue.

A requirement that German Pfandbrief issuers hold enough liquid assets to cover a liquidity mismatch of up to 180 days, which came into effect on November 1, has helped avert rating downgrades of mortgage Pfandbriefe under Fitch’s new covered bond liquidity risk criteria, said the rating agency yesterday (Tuesday).

Pfandbriefbank schweizerischer Hypothekarinstitute raised Sfr825m (Eu564m) in the Swiss franc market on Monday through a three tranche issue.

Bankinter is today (Tuesday) pricing a five year benchmark that market participants hope will provide welcome relief from recent Spanish deals that have not performed in the secondary market. Meanwhile, other borrowers are embarking on roadshows ahead of deals to be launched as early as next week.

Dexia Municipal Agency is today (Tuesday) increasing its September 2016 obligations foncières by Eu750m at a level 5bp inside the re-offer spread on the initial issue.

The daily average of settled covered bond purchases under the European Central Bank’s Eu60bn scheme has dropped to the lowest level in over a month on the back of a Eu77m increase reported by the ECB this (Tuesday) morning.

Royal Bank of Canada last week demonstrated that there is domestic support for the covered bond product by pricing the first Canadian dollar denominated covered bond launched by a Canadian bank. Such evidence of a domestic investor base should serve to strengthen future covered bond offerings by RBC and its peers in other markets, and may attract international issuers to the Canadian market, bankers told The Cover.

Total settled purchases under the European Central Bank’s Eu60bn covered bond programme reached Eu20.642bn this (Monday) morning. With only one benchmark eligible for the scheme settling this week, secondary market acquisitions should largely determine the amount of buying reported in the coming days.