Covered Bonds

In brief: The Royal Decree finalising the update to Spain’s cédulas framework was published in the country’s official gazette on Saturday and came into force yesterday (Monday).

Standard & Poor’s has downgraded Marfin Egnatia Bank from BBB to BBB-, and changed the outlook on two other Greek covered bond issuers from stable to negative.

Kookmin Bank is moving closer to selling the first Asian covered bond, but market participants today (Monday) appeared to be no closer to agreeing on where the deal should be priced and how successful it is likely to be.

Leeds Building Society’s covered bond programme has been granted Regulated Covered Bond status by the UK Financial Services Authority this week, a move that carries potential rating benefits.

Poland’s BRE Bank Hipoteczny is continuing to discuss with Moody’s potential enhancements to its covered bonds to stave off a downgrade.

Caisse de Refinancement de l’Habitat increased its Eu1.2bn October 2017 issue by Eu250m yesterday (Thursday) afternoon, while CIF Euromortgage tapped a Eu1.5bn October 2016 deal for Eu110m.

Covered bond issuers will have to commit to obtain full issuer ratings by the end of this month rather than make do with credit “estimates”, said Moody’s yesterday (Thursday). Meanwhile, S&P has clarified the ratings to which covered bonds will be linked under its new approach.

Moody’s is reviewing its EMEA asset-backed securities methodology for rating transactions involving shipping loans, which it applies to covered bonds backed by such collateral, including Schiffspfandbriefe.

Taps are the order of the week in the covered bond market, with at least four expected to have been completed by tomorrow (Friday).

Fitch has lowered the Discontinuity Factors (D-Factors) it assigns seven UK Regulated Covered Bond programmes in light of the country’s year-old legislation. This makes the covered bond ratings more resilient against a downgrade of the issuer – for now, at least. [Amended to rectify errors in Fitch's release.]

Fitch on Tuesday changed the outlook on the issuer rating of Caja de Ahorros y Pensiones de Barcelona (La Caixa) from stable to negative, but revised upward its expectation of government support for the Spanish savings bank.

Analysts in Europe have suggested that Kookmin Bank’s covered bonds are unlikely to appeal to traditional covered bond investors because of how they are structured and because credit card receivables, an asset class that has yet to appear in cover pools, form a significant part of the collateral backing the Korean bank’s bonds. However, one pointed out that the new collateral does have benefits for issuers and investors.