Covered Bonds

Fitch yesterday (Thursday) affirmed the AAA rating of Allied Irish Bank Mortgage Bank's residential mortgage covered securities and Bank of Ireland's UK covered bonds. However, a recent downgrade of the issuers, which are the swap counterparties for their covered bond programmes, means that remedial action is necessary.

Compagnie de Financement Foncier tapped a Sfr500m March 2013 deal for Sfr250m at plus 90bp via Basler Kantonalbank and Zürcher Kantonalbank on Wednesday, taking the issue to Sfr750m (Eu496m).

Fitch yesterday (Thursday) downgraded two western European covered bond issuers after a review of European banks’ exposures to eastern Europe and the Commonwealth of Independent States (CIS).

Better than expected first-quarter bank results and unguaranteed bond supply from lower rated financial institutions gave market participants in Europe and the US hope that the market is on the road to recovery this week.

Moody’s yesterday (Thursday) downgraded Chelsea Building Society’s covered bonds from Aaa to Aa3 and put them and the triple-A rated covered bonds of seven other UK financial institutions on review for downgrade, after taking action on their issuer ratings on Tuesday.

The flow of Spanish government guaranteed bond issuance is showing no signs of stopping as two more borrowers are preparing issues, of which at least one will be priced next week.

Société Générale SCF is increasing its recent Eu1.25bn 10 year public sector obligations foncières issue by Eu1bn after encountering strong real money demand for the tap. Meanwhile a rare, if modest and privately placed, dollar issue was executed yesterday (Wednesday).

Moody's yesterday (Wednesday) changed its outlook on the Finnish banking system from stable to negative, and placed the rating of Pohjola Bank, part of the OP-Pohjola Group, on review for possible downgrade.

Moody's yesterday (Tuesday) took multiple negative rating actions on UK mortgage lenders, including one four notch downgrade, because it is concerned that they will face higher credit losses than previously anticipated.

A Eu125m tap for Eurohypo has been the only jumbo covered bond activity so far this week, with the Easter holidays and competition from other asset classes stymieing new issuance.

Moody's last Thursday placed on review for possible downgrade the mortgage and public sector Pfandbriefe issued by SEB AG.

The first covered bond from an Asian bank appears to have moved a step closer after a covered bond company was set up in Ireland that is thought to be related to a Korean issuer's plans.