Trichet’s three to 10 year range seen as guideline, not rule

  • 14 Aug 2009
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Settled purchases under the European Central Bank’s covered bond purchase programme reached Eu6.299bn on Thursday, just over 10% of the Eu60bn that has been earmarked for the scheme.

Depending on the daily increase that will be disclosed today (Friday), this week could be the second highest in terms of the weekly total of reported settled purchases; only Eu96m is needed to take this week’s tally of daily increases above the Eu1.307bn total for the week of July 27, which was the third full calendar week of reporting and second highest after the Eu2.193bn total for the preceding week.

By Thursday daily increases of Eu468m, Eu139m, Eu235m and Eu370m had brought the week’s count to Eu1.212bn.

Every morning the ECB reports the cumulative amount of covered bond purchases that have settled up to and including the previous day. Three public issues that meet the ECB programme’s eligibility criteria, all Compagnie de Financement Foncier taps amounting to Eu1.15bn, closed this week.

Two of these CFF increases were longer than 10 years, both being of a 4.875% May 2021 deal, putting them outside a three to 10 year range for purchases under the programme that, although not included in the document detailing the official eligibility criteria, ECB president Jean-Claude Trichet at two press conferences indicated buying would be restricted to. However, Trichet’s wording was not categorical.

Since the start of the ECB’s purchase programme on July 6, issuance has mostly been concentrated in the three to five year maturity range, and therefore well within the three to 10 year bracket. Indeed only CFF has provided any benchmark supply with a maturity longer than 10 years, through its taps.

However, despite Trichet’s comments and the focus on issuance within the range he quoted, the 10 year maturity should not be seen as a hard limit, bankers have suggested.

"I don’t think that they’ve limited themselves, either in the primary or secondary market," said one syndicate official. "I think they’re happy to participate across the curve and a variety of names."

Another syndicate official said that his bank had not observed any central bank buying of deals with a maturity longer than 10 years on the secondary market, but that he would not rule out this happening.

"I’m not sure they really need to," he added. "You would expect the curve beyond 10 years to have steepened, but the whole market has moved in."

He suggested that there was enough demand for the long end of the curve from other investors for the ECB to stick to the three to 10 year range it indicated when it first outlined the programme’s focus.

But one banker suggested that this appetite for duration was a reason why the ECB should not treat the 10 year maturity as a hard upper limit.

"It would be a horrible arbitrary cut-off point," he said. "It would be very market disruptive on behalf of the ECB."

NIBC covered enters register, Aegon aims to follow suit

NIBC Bank’s Eu7bn covered bond programme has been registered with the Dutch central bank, and are therefore UCITS-compliant, the issuer announced on Thursday.

An official at the bank said that the covered bonds will not comply with the Capital Requirements Directive (CRD) and will therefore be 20% risk weighted as opposed to the 10% preferential risk weighting that is achieved by dual compliance with the CRD and UCITS.

Insurance company Aegon is aiming for the covered bonds to be issued by its Aegon Bank subsidiary to be registered under Dutch legislation, Ed Beije, co-head of group treasury with responsibility for the execution of Aegon’s capital markets activities told The Cover, EuroWeek’s sister publication.

These are also unlikely to comply with the CRD because some of the mortgages that will back the bonds will have loan-to-value ratios higher than the 80% ceiling imposed by the CRD.

The insurer hopes that Aegon Bank will be ready to issue covered bonds by the end of the year,

"Aegon Bank is likely to issue a limited number of benchmark covered bond transactions in the future," said Beije.
  • 14 Aug 2009

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 31,385.40 114 7.52%
2 JPMorgan 29,232.19 105 7.00%
3 Goldman Sachs 27,645.83 55 6.62%
4 Barclays 26,090.00 67 6.25%
5 Deutsche Bank 23,883.15 74 5.72%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 Mizuho 299.85 1 21.73%
1 ING 299.85 1 21.73%
1 Commerzbank Group 299.85 1 21.73%
1 BNP Paribas 299.85 1 21.73%
5 UBS 60.22 1 4.36%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 Goldman Sachs 1,607.28 5 22.59%
2 Credit Suisse 1,301.65 4 18.30%
3 UBS 970.80 3 13.65%
4 BNP Paribas 522.35 4 7.34%
5 SG Corporate & Investment Banking 444.17 3 6.24%