Euro

Dexia group plans to dispose of its French municipal financing entity Dexia Municipal Agency (DMA), it revealed on Thursday, when releasing third quarter earnings. In outlining its new structure, it clarified that Dexia Credit Local (DCL) would no longer be a shareholder.

Santander Totta and Caixa Geral de Depósitos, two of Portugal’s leading banks, are both considering whether to issue senior or covered bond deals, in the wake of Banco Espírito Santo’s breakthrough senior issue earlier this week. Bankers say neither bank has decided which route to go down.

Fitch has downgraded the covered bonds Realkredit Danmark uses to fund adjustable rate mortgage loans, just weeks before the Danish auctions begin. Meanwhile, European covered bond downgrades have increased sharply, Moody’s reported.

This week’s trades from Terra Boligkreditt and Landesbank Hessen-Thueringen (Helaba) performed well in the secondary market on Wednesday. However, the lower rated Norwegian deal shone brighter, paying testimony not only to the strength of the jurisdiction and collateral but also to Terra’s exceptional marketing effort.

Landesbank Hessen-Thueringen Girozentrale (Helaba) on Tuesday became only the second issuer in four years to price a benchmark covered bond through mid-swaps.

Terra Boligkreditt has issued its first €1bn covered bond, following extensive marketing. Not surprisingly, given the paucity of euro denominated covered bond supply, there was plenty of demand from a wide range of investors across Europe.

HSH Nordbank has taken the unusual step of using a synthetic securitisation that frees up no regulatory capital at all. Instead, the credit protection provided by KfW on a portfolio of SME loans means they can now be used as collateral in HSH’s public sector Pfandbriefe — the bank’s most important source of term funding.

Standard & Poor’s has cut BNP Paribas ratings and lowered its outlook on four other French covered bonds issuers because of rising risk in the French banking system. Meanwhile, Moody’s downgraded CIF Euromortgage’s covered bonds after taking the same action on the issuer.

Banca Monte Dei Paschi di Siena’s secondary covered bond spreads are holding firm following another downgrade, but Spanish spreads are weakening after their recent rally. Peripheral borrowers could still bring successful benchmarks, but compression between covered and senior levels means there is less incentive to use valuable collateral, syndicate bankers told The Cover.

After an impressive rally in covered bond spreads, Australian banks are likely to concentrate on offshore markets for covered issuance and use RMBS to tap the domestic buyer base, the Reserve Bank of Australia’s assistant governor for financial markets said on Monday.

Norway’s Terra Boligkreditt began a week long roadshow on Monday, ahead of what could be its first ever jumbo covered bond. But the prospect of a limit on Norwegian covered bond issuance should prompt questions from investors.

Bankinter’s blowout three year Cédulas was a trade that had seemed almost unimaginable until the curious decision by Moody’s to reaffirm Spain’s Baa3 rating. The agency’s reprieve has opened a funding window for other less systemically important covered bond issuers who want to demonstrate that they still have market access. But borrowers must be ready to move quickly as sentiment could easily sour.