Americas

The version of the US Covered Bond Act of 2010 passed by the House Financial Services Committee last month will help investors, according to Moody’s, but does not adequately deal with market value risk and could lead to different standards for different types of issuers.

The House Financial Services Committee passed the United States Covered Bond Act of 2010 yesterday (Wednesday) in a quick markup after some concessions were made to the Federal Deposit Insurance Corporation. However, a compromise over how overcollateralisation should be treated has not yet been reached.

Canadian Imperial Bank of Commerce took its covered bond funding in the US market this year to $4.25bn (Eu3.27bn/C$4.39bn) yesterday (Tuesday), increasing its two outstanding 144A issues by a combined $1bn. Meanwhile, French taps in euros continued with Banques Populaires Covered Bond.

The House Financial Services Committee has scheduled a markup for tomorrow (Tuesday) of an amended version of the United States Covered Bond Act of 2010. The new language is understood to take into account some concerns raised by Senators who in June rejected a proposed covered bond amendment in the Dodd-Frank Act, and appears to be designed to deal with the Federal Deposit Insurance Corporation’s opposition to key provisions of the bill.

Toronto-Dominion launched a $2bn five year inaugural covered bond yesterday (Thursday), becoming the fifth Canadian bank to tap the dollar market with a covered bond this year. Compagnie de Financement Foncier today launched the fourth euro tap of the week, increasing its recent 15 year deal by Eu450m.

Bank of Nova Scotia priced a $2.5bn (Eu1.96bn) three year covered bond yesterday (Thursday) that is the second largest ever dollar covered bond and the largest fixed rate single tranche dollar issue from a Canadian bank in any format, according to data from Dealogic. In euros activity has been confined to taps.

Proponents of covered bonds are hopeful that legislation could be enacted in the US this year, even though a covered bond amendment failed to make it into the financial reform bill completed last week.

Canadian Imperial Bank of Commerce is set to price its second US dollar benchmark covered bond today (Friday).

Plans for US covered bond legislation have been included in the House of Representatives’ offer to the conference responsible for coming up with a financial reform bill unifying the versions approved by the Senate and the House.

Standard & Poor’s has downgraded WM Covered Bond Program from AAA to AA and assigned it a negative outlook under its revised covered bond rating methodology.

BNP Paribas priced the biggest benchmark covered bond since the middle of April yesterday (Wednesday) to wrap up the busiest day in the market since then, with Sparebanken Vest and Dexia Kommunalbank Deutschland also taking half a yard each out of the market.

Three issuers launched euro covered bonds this (Wednesday) morning ahead of a public holiday in many parts of Germany tomorrow, with market conditions said to be better than yesterday, although still weak. Meanwhile, the US market could see its first new covered bond supply since mid-April.