Americas

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.

Canada’s DBRS rating agency has published a review on the Canadian government’s covered bond consultation paper titled: no impact on Canadian bank ratings. Though there have been a large number of covered bond deals it says that none of the banks are close to the hitting the existing limit of 4% of total assets.

The Canadian Department of Finance’s consultative paper outlining a legislative proposal for a covered bond legal framework “would be credit positive for investors,” said Moody’s. However, because overcollateralisation is capped, the issuer’s rating would have to be above a certain threshold. Moreover, because only federally regulated institutions would benefit, other issuers such as CCDQ would be left out in the cold.

The Canadian government has published a draft consultation paper proposing a legislative framework for covered bonds. It says legislation will create a more robust product that will retain investor confidence in periods of market instability by providing legal certainty and setting minimum standards. It will also help financial institutions diversify their sources of funding.

The US House Financial Services Subcommittee has approved the Covered Bond Act 2011. The bill contains new amendments that strengthen and protect investors’ rights. Critically, investors, and not the Federal Deposit Insurance Corporation, continue to have a priority claim on the cover pool assets — both eligible and ineligible. The modified bill is now ready to proceed to the next stage.

Ultra-loose monetary policy in the west and exchange rate inflexibility in emerging economies could spell a devastating inflationary spiral and a hard landing for the global economy, a leading expert has warned