Americas

Canadian Imperial Bank of Commerce found a window for issuance amid market volatility on Thursday, launching its third Australian dollar deal of the year. In a difficult week for all asset classes, market participants said the A$600m three and a half year benchmark showed covered bonds are living up to their billing as a genuinely global product.

Primary issuance returned to the covered bond market on Monday when Korea Housing Finance Corporation sold $500m of five and a half year bonds. It is the first deal in the international market since July 5, but market participants say it does not herald a rejuvenation of supply - particularly for Europeans, who were glaringly underrepresented in allocation.

Korea Housing Finance Corporation has opened books on its second ever covered bond, a $500m five and a half year transaction. US book building has yet to commence, but with the book already twice covered on the back of strong demand from Asia and Europe, a good reception seems likely. The deal is expected to price later today.

BNP Paribas has launched the first dollar covered bond index that includes non-SEC registered transactions, which make up nearly all of dollar denominated covered supply. But the French bank will need market interest to legitimise the decision to include bonds that are not allowed on other leading indices, according to market participants.

A change in leadership at the Federal Deposit Insurance Corporation seems unlikely to make the organisation more receptive to US covered bond legislation in its current form. Rating agency DBRS reports that vice chairman Martin Gruenberg believes that in the event of a bank failure, the FDIC and not investors should have first rights on excess covered bond collateral.

HSBC became the latest issuer to tap the dollar market on Tuesday, pricing an inaugural $1.25bn three year deal. In contrast to euro denominated supply, which in H2 2011 is not expected to match the record amount issued in the first six months of the year, dollar issuance is expected to expand. German and Italian issuers are understood to be preparing debut dollar benchmarks, and the South Korean government today encouraged certain banks to increase issuance.

Four major investors talked to The Cover about their near term strategy and thinking. They do not think much will change, even if there is a positive Greek outcome. Though two of them felt sentiment could improve a little if the prospective Bankia IPO is successful, confidence in the banking sector is not in great shape.

The introduction of specific Canadian covered bond legislation “would be positive, and would likely provide further assurances for investors”, according to Standard & Poor’s. However, the rating agency emphasised that a codified covered bond law is not enough in itself to merit good ratings. Outstanding concerns include: limits to overcollateralisation, the lack of refinancing options after a segregation event, and Canada’s particular preference for demand loans to finance SPEs.

The US Treasury has called on China to bring its business dealings in Africa into line with international standards

After the activity and drama of the first part of the week, Ascension Day holidays across most of Europe have lent a quiet tone to the market and a more sedate close is anticipated. But with as many as five deals mandated and a few others rumoured, the pace is likely to pick up next week.

UBS made its first appearance in the covered market for over a year on Thursday. The Swiss borrower will price later today a three times oversubscribed Eu1bn five year deal, which a syndicate lead said had achieved the tightest pricing in that maturity outside of Pfandbriefe, since the collapse of Lehman Brothers.

US covered bond legislation is creeping ever closer, despite not having universal support. Its backers hope President Obama will sign the act into law before the end of the year. Bill Thornhill reports.