Covered Bonds

Obligations foncières passed their biggest test in the wake of Lehman Brothers’ collapse. And although the structured issuance of French national champions outperformed those based on the law of June 25, 1999, they, too, could soon benefit from being given a legislative blessing.

Fitch today (Tuesday) downgraded Chelsea Building Society’s mortgage-backed covered bonds from AAA to A because the issuer has not fulfilled requirements to establish a third party bank account and contingent interest swap counterparty following its short term issuer downgrade, as set out in the programme documentation. Meanwhile, Norwich & Peterborough Building Society has completed a restructuring of its covered bond programme.

Settled covered bond purchases under the European Central Bank’s programme rose by Eu510m, the highest daily increase in over two weeks, this (Tuesday) morning to take the cumulative amount to Eu16.09bn.

Despite its obvious attractions, the obligations foncières framework proved too inflexible for several of France’s lenders. But this did not prevent them from entering the covered bond market, as BNP Paribas led a second revolution in French covered bonds.

Today is the 10th anniversary of the first obligations foncières of the modern era, launched by Compagnie de Financement Foncier on 6 October 1999. In this special report, we look back on the origins, growth and future of the French covered bond market.

Abbey, the Santander subsidiary that is expected to launch a new benchmark this week, is facing a fatigued covered bond market in which several recently priced deals have not performed in the secondary market, syndicate officials said today (Tuesday).

Pfandbriefbank schweizerischer Hypothekarinstitute yesterday (Monday) raised Sfr980m (Eu649m) in the Swiss franc market through a three tranche issue.

A trio of new obligations foncières issuers arriving in 2008 and 2009 after a 6-1/2 year hiatus showed that the instrument had retained its relevance, and could even challenge its structured counterpart for innovation.

Buoyed by the arrival of a third name and flattered by comparisons with their German counterparts, the early obligations foncières issuers took full advantage of the strength of the new product to go out on the road in search of new investors.

Any Eurosystem participation in four new benchmark covered bonds settling in the coming days could feed through into this week’s reporting on the European Central Bank’s programme. Total purchases stood at Eu15.58bn this (Monday) morning after a Eu151m increase.

Danske Bank on Friday issued a Nkr1.5bn (Eu178m) five year floating rate note as a follow-up to a euro benchmark priced on Wednesday.

Source: Dealogic. Data includes jumbo issues in euros and $1bn minimum issues in dollars; excludes retained deals under Dealogic criteria.