Covered Bonds

The rating agencies yesterday (Thursday) moved on Allied Irish Banks and Bank of Ireland, with Moody's taking the firmest action.

The European Mortgage Federation is developing a framework of sound lending principles for European loan originators as part of its strategy to help the European mortgage industry respond to the credit crisis and economic downturn. Meanwhile S&P's proposed methodology changes have forced themselves onto the European Covered Bond Council's agenda.

Fitch today (Friday) placed the AAA rating of Düsseldorfer Hypothekenbank’s public sector Pfandbriefe on negative review. The rating action follows that on the issuer.

Erste Bank yesterday (Thursday) continued this week’s trend of pricing government guaranteed issues in line with guidance, some at tighter levels than the most recent deals from the respective jurisdictions. Meanwhile a third Spanish bank is preparing to follow in Caja Madrid's footsteps.

Fees for benchmark covered bond issues have risen sharply since BNP Paribas reopened the jumbo market in early January. After many years during which issuers fiercely resisted calls for greater remuneration from their leads and market-makers, market participants on all sides appear to acknowledge that the move was near-inevitable.

Erste Bank is in the market today (Thursday) with its second government-guaranteed transaction. The deal is the fifth Austrian government-backed bond, and Erste's first in the five year maturity.

Panellists at the American Securitization Forum conference in Las Vegas said on Tuesday that the credit crisis had opened up new opportunities for covered bonds in the US, even as it had called into question the idea that they are a rates product rather than a credit product.

Five new deals have been priced in the euro financial institutions market so far this week, with three banks going the guaranteed route and two unguaranteed. The pace is expected to continue, with another new mandate announced this (Wednesday) morning.

NordLB today (Wednesday) priced a Eu2bn five year bond guaranteed by the state of Lower Saxony. The deal was sold at 70bp over mid-swaps, just 5bp inside the Eu1bn five year public sector jumbo Pfandbrief issued by Landesbank Baden-Württemberg last week.

Compagnie de Financement Foncier printed a Sfr350m (Eu232m) four year obligations foncières issue yesterday (Tuesday), its first public deal of the year, excluding two taps, and its largest public deal since June 2008, according to data from Dealogic.

Moody’s has downgraded Depfa ACS Bank’s asset covered securities from Aa1 to Aa2 and they remain on review for possible downgrade. Moody’s affirmed its ratings of the covered bonds issued by other members of the Hypo Real Estate group.