Americas

A group of four US senators from both political parties has introduced US covered bond legislation into the Senate. Bi-partisan support from the upper house is highly encouraging, and though the Federal Deposit Insurance Corp still has issues with prospective legislation, broad Congressional support could still push the bill through.

In a world echoing with cries for tighter banking regulation, Canada risks strangling one of the most promising covered bond markets through overly stringent supervision.

While Westpac and Commonwealth Bank of Australia headed to the US on Monday to market debut covered bonds, ANZ has started meeting investors in Europe, after finishing a US roadshow last week.

Westpac and Commonwealth Bank of Australia (CBA) started US roadshows on Monday and will go into investor meetings with expected/provisional triple-A ratings secured for their programmes. All four Australian banks with covered bond programmes now have provisional triple-A ratings from Moody’s and Fitch. But National Australia Bank (NAB) is winning the race to issue Australia’s first covered bond, after completing its US and European roadshow last week and mandating for a dollar transaction on Friday.

The UK’s Co-operative bank has sidestepped European turmoil and swap costs by choosing to bring its inaugural 10 year transaction in sterling. After finishing a roadshow earlier in the week the issuer sold its debut benchmark at the tight end of guidance against an improved market backdrop, with an attractive new issue premium.

It is in neither China's nor the US’ best interest to continue bickering over currency

Activity has once again shifted into dollars, with European investors paralysed by a lack of detail on the upcoming ECB covered bond purchase programme and a resolution of the sovereign debt crisis. Meanwhile Canadian banks issue dollar deals with ease, and Australia’s big four could be swayed into taking the same route for their respective debuts, said syndicate officials.

Since its inception in 2008, Canada’s covered bond market has grown steadily to become the cornerstone of US dollar supply. The next step will be the enactment of a covered bond law which will allow Canadian banks to reach investors across the globe. Between regulation and legislation, however, Canadian covered bond issuers face stringent limitations on the product’s use.

Market indices rallied on Thursday, following the EU’s unveiling of its Grand Plan to remedy the eurozone’s woes. BPCE was quick to capitalise on the upturn, securing nearly four times oversubscription for a minimum €200m tap of its 10 year. Bank Austria also moved swiftly on the positive mood and is taking IOIs for possible pricing this afternoon or Friday. Bank of Montreal showed the strength of US demand on Wednesday, when it attracted $3.75bn of demand for its $2bn three year deal. But the floodgates are unlikely to open fully ahead of November 3 when the ECB will announce details of its purchase programme.

German issuers with US dollar assets in their cover pools may start looking at the US 144A market early next year, following the German Association of Pfandbrief Banks (vdp) first US roadshow in three years.

Europe’s banks need to give US covered bond investors more detail and with more frequency if they are to retain access to the coveted buyer base, fund managers have told the industry.

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