Covered Bonds

Fitch yesterday (Wednesday) affirmed its AAA rating of Dexia Municipal Agency’s obligations foncières. The affirmation comes despite the rating agency’s downgrade of Dexia Crédit Local from AA+ to AA-, with a stable outlook.

With Barclays Capital and UniCredit split by only 0.01% in terms of market share, the top of the benchmark league table couldn’t be any closer. But will either get a chance to pull ahead before year-end? Lehman Brothers’ collapse could be a key determinant - in more ways than one.

Moody’s yesterday (Wednesday) reacted to the Icelandic government’s rescue of Glitnir Bank by downgrading the bank’s covered bond ratings from Aaa to Aa1. The ratings were placed on review for possible further downgrade.

These are the second of The Cover's monthly charts showing a breakdown of supply in the covered bond market using data from Dealogic.

Source: Dealogic

Dexia today (Tuesday) received a Eu6.4bn equity injection from governments and other shareholders after the group’s shares fell almost 30% yesterday (Monday). After a trading suspension was lifted this morning the stock rallied around 20%.

Bo Heide-Ottosen, the Hypo Real Estate Holding and Depfa board member central to the group’s treasury and public finance activities, has left the group in the wake of its rescue by a consortium of German banks and the German government.

Covered bonds issued by Allied Irish Bank, Bank of Ireland and Anglo Irish Bank were boosted today (Tuesday) by the Irish government’s decision to set up guarantee arrangements for local banks. The arrangement does not, however, affect the asset covered securities of Depfa ACS Bank or WestLB Covered Bond Bank.

The Securities Industry & Financial Markets Association is understood to be holding a meeting this (Tuesday) afternoon that is expected to discuss the possibility of establishing a covered bond forum and examine the future of knock to knock market-making. This would seem to put the association in direct competition with the European Covered Bond Council.

HM Treasury ended the uncertainty over the fate of Bradford & Bingley’s covered bonds yesterday (Monday) afternoon by bringing them under the government guarantee that had already been extended to certain of the bank’s liabilities.