Covered Bonds

A move towards new electronic trading platforms for the covered bond market appears closer after a dealers’ organisation yesterday (Tuesday) endorsed one system provider’s proposed platform and another association suggested it could do likewise in the not too distant future.

Fitch yesterday (Tuesday) downgraded Banco Popular Español from AA to AA-, on concerns over its funding mix and its exposure to the worst-hit sectors of the Spanish economy.

Britannia Building Society has set up a covered bond programme, just a few days after Moody’s downgraded the covered bonds of Chelsea Building Society and put those of seven other UK issuers on review for downgrade.

The recent trend of covered bond issuers tapping outstanding jumbos continued today (Tuesday), while one French name is said to have this week tested investor sentiment for a new issue.

The UK financial institutions affected by last week’s negative rating actions from Moody’s are exploring ways of staving off downgrades of their covered bonds and alternative means of accessing liquidity should they fail to do so. However, the fate of Chelsea Building Society’s covered bonds, which suffered a three notch downgrade, is unclear.

Sparebank 1 Boligkreditt will be holding a non-deal roadshow next week and the related savings banks are also setting up a new covered bond programme.

Less than two weeks remain of a consultation period that Fitch opened on 11 March, when it revealed to the market proposed changes to its assessment of liquidity risks within covered bond programmes. Industry members have been getting together to discuss the rating agency’s proposals, which, although meeting with a more relaxed reception than Standard & Poor’s, are still coming in for criticism.

Fitch on Friday affirmed the AAA rating of Dexia Municipal Agency's obligations foncières despite a downgrade of its parent, Dexia Crédit Local, from AA- to A+.

The fixed income markets this (Monday) morning got off to a busy start, with several issuers taking advantage of supportive conditions to launch transactions. Covered bonds are not yet among the deals on offer, but syndicate officials are suggesting that they, too, could get off the ground.