Covered Bonds

Banco Espírito Santo has enjoyed a turbulent first year in the covered bond market, with praise for its new Eu1.25bn two year for keeping the primary market open contrasting with the criticism it received after its debut Eu1.25bn three year in January pushed secondary spreads wider. The Cover spoke to Paul Ferreira, head of funding at BES, about its new issue and future plans.

After Banca Popolare Milano brought the first obbligazioni bancarie garantite to market, The Cover spoke to Enzo Chiesa, chief financial officer at BPM, about how one of Italy’s regional players came to end the long wait for Italian covered bonds.

Credit Suisse could become the first Swiss bank to issue a standalone covered bond and the first outside the country’s Pfandbrief Act, The Cover understands.

In brief: FHB Mortgage Bank has mandated RZB for a Eu100m covered bond to be launched next week. The July 2011 FRN is expected to be priced in the 125bp over Euribor area.

Moody’s yesterday (Thursday) said that it is still reviewing Bradford & Bingley’s covered bond rating for possible downgrade, following its cut in B&B’s senior rating from A3 to Baa1 last Friday.

Merrill Lynch has hired Nicolas Poli to trade covered bonds. The firm had been looking to hire a covered bond trader since it let go Benjamin Moulle last summer.

The Federal Deposit Insurance Corporation is expected to release its final covered bond policy statement next Tuesday (15 July), when it holds its monthly board meeting. The move should pave the way for the US Treasury to take the initiative and come out with its own policy on covered bonds.

Banco Espírito Santo priced only its second covered this (Thursday) morning and the final size was enough to make it the largest covered bond in over a month. Those outside the deal said it was a pleasant surprise that two benchmarks could be priced during a bumpy week.

In brief: Sparebanken Vest is set to join the Norwegian covered bond market, having set up Sparebanken Vest Boligkreditt AS. The bank has said that it plans to launch its first issue this year.

In brief: Standard Life Bank has launched what is believed to be its first covered bond, a £1.5bn (Eu1.87bn) three year floating rate note. The Cover understands that the issue is the first off a Eu5bn covered bond programme.

Even if supply did not reach the levels some considered possible at the beginning of the year, covered bond analysts share the view that volumes in the first half held up well in difficult conditions. However, their predictions for the rest of 2008 and beyond are gloomier.

Fitch today (Wednesday) said that the draft amendment to the Pfandbrief Act has failed to adequately address the issue of liquidity gaps, which are the most important driver of differences in Discontinuity Factors (D-Factors) assigned by the rating agency to covered bond programmes.