Currencies

European inflation, as well as expectations for inflation, are continuing to fall and the European Central Bank is likely to announce a quantitative easing (QE) programme in December, economists told The Cover on Thursday. With core yields set to tumble the allocation of real money demand to the periphery will accelerate and pricing of core covered bonds could become established at sub-Euribor levels, The Cover believes.

National Australia Bank (NAB) looked set to tap a deal by double the minimum it had expected at less than half the spread the deal was originally offered at only three months ago. The increase comes after draft rules suggested covered bonds issued by banks outside the European Economic Area (EEA) will be eligible for inclusion in the liquidity coverage ratio, boding well for more supply from issuers outside Europe.

RBS was unable to attract a sufficient quorum to pass a series of swap amendments to its covered bond programme.

Landesbank Hessen-Thueringen (Helaba) tapped the three year leg of its dual-tranche issue from May on Thursday morning, mirroring the syndication strategy it used to tap the deal’s seven year leg in July — aggressive pricing and doubling the size of the issue.

The value of your house is a popular subject at middle class dinner parties everywhere, but the far more important loan-to-value (LTV) ratio never comes up.

Fitch upgraded 13 multi-Cédulas (MC) bonds on Friday saying their exclusion from the bank recovery and resolution directive (BRRD) and an improvement in credit quality was behind the decision. The upgrades have taken most deals into single-A territory, which should be a boost to the sector. However, the move serves to highlight the rating agencies' divergent opinions.

Martin Nijboer, head of securitizations at ING Bank, has explained why his bank has set up a new soft bullet covered bond programme, which received approval this week from the Dutch Authority for the Financial Markets (AFM).

Covered bonds are expected to tighten, as the fall in outright yields and expectations of lower supply boost sentiment. On Thursday, dealers reported decent buying of peripheral bonds, and specifically Irish deals which were buoyed on speculation that a sovereign rating upgrade was on the way.

The Monetary Authority of Singapore (MAS) has published feedback to a consultation on Basel III liquidity rules, in which it confirms that its interpretation of the rules will be closely in line with the original international proposals published in December 2010. Covered bonds are expected to be eligible for inclusion as a level 2A asset.

Moody’s has said that a transfer of relatively risky assets from Crédit Foncier de France (CFF) to its parent BPCE is credit positive.

The race is on to issue the second legally compliant covered bond from New Zealand after the Reserve Bank of New Zealand signed off the covered bond programmes of ASB Bank, ANZ New Zealand, Bank of New Zealand and Kiwibank under the new law on Friday. The borrowers will be looking to emulate the success of Westpac New Zealand, which got a fantastic reception for its legally compliant debut in June.

European covered bonds have been relatively stable in the secondary market this week, though second tier banks in the periphery widened marginally on light selling on Friday, with Banca Monte dei Paschi di Siena leading the way after posting a higher than expected loss. The move is likely to be short-lived provided the geopolitical backdrop does not worsen.