Americas

Standard & Poor’s downgraded Bank of America’s covered bonds from AAA to AA, on negative outlook, yesterday (Wednesday) following a review of the programme under the rating agency’s revised criteria, because of insufficient credit enhancement.

Covered bonds could yet play a part in US financial reform legislation that is shortly to be finalised, despite not having featured in either of the relevant Senate or House of Representatives bills.

Standard & Poor’s has said that a covered bond bill introduced in the House of Representatives in March addresses an important aspect of its rating methodology, but would not necessarily improve the position of US covered bonds within its key country categorisation.

A bipartisan initiative to include covered bond legislation in the Senate’s financial regulatory reform bill is underway, according to a letter on Friday from Republican Congressmen who have been lobbying for the asset class in the House of Representatives.

Canadian bank Toronto Dominion has filed a Eu10bn public sector covered bond programme.

Compagnie de Financement Foncier priced a $2bn three year obligations foncières issue yesterday (Thursday) and achieved a long-held goal of accessing the US investor base by selling it 62% of the new covered bond.

Desjardins, Canada’s largest co-operative financial group, is preparing to set up a covered bond programme and Quebec’s financial regulator has outlined an initial position in relation to issuance.

Royal Bank of Canada is expected to price a $1bn minimum five year deal this (Wednesday) afternoon in only the second benchmark covered bond to have been targeted at US accounts since July 2007.

The possibility of post-issuer-insolvency covered bond estates raising liquidity from Federal sources has been dropped in the latest draft of US covered bond legislation, but is not a serious blow to the strength of the proposed framework, according to market participants.

Treasury Secretary Timothy Geithner said that consideration of covered bonds would be an important part of looking at the US reform agenda during a House Financial Services Committee hearing yesterday (Tuesday).

The Senate Banking Committee passed the Dodd Bill yesterday (Monday) without a covered bond amendment that had been offered by Republican Senator Bob Corker, after the Republicans withdrew all their amendments and the bill was passed in a vote along party lines.

Republican congressman Scott Garrett introduced the United States Covered Bond Act of 2010 yesterday (Thursday), which builds on his previous efforts to create a legislative framework for the asset class in the US.