Europe

On Friday Fitch put the AA+ rated covered bond programmes of Caffil and CoFF, and the public sector programme of BNP Paribas, on rating watch negative (RWN), following an identical action on the French sovereign earlier last week.

S&P downgraded a number of Cédulas Hipotecarias and upgraded one Cédulas Territoriales as it begins to implement its sovereign ceiling methodology. The new ratings are now broadly in line with the other agencies and were expected. The agency is expected to announce revisions to Italian covered bond ratings that are also likely to lead to two downgrades.

La Caisse Centrale Desjardins du Quebec (CCDQ) was back in the euro market on Wednesday with its second five year legislative covered bond of 2014, this time achieving a solid book and pricing at the tight end of guidance. The positive result was in contrast to its disappointing inaugural deal in March. Wednesday’s deal was priced at an expected 2bp pick-up over the stronger Canadian Imperial Bank of Canada’s (CIBC’s) five year trade last Wednesday.

Covered bond yields fell on Tuesday as Bunds rallied following a larger than expected fall in the ZEW business sentiment index and lower than expected inflation data. The European Central Bank (ECB) could be poised to commence buying on Wednesday after its scheduled meeting. Since the ECB is likely to be targeting the spread to government bonds, Pfandbriefe are likely to be on the bank’s shopping list, as they look more attractive than peripheral bonds versus their government bonds.

Goldman Sachs has not given up on its Fixed Income Global Structured Covered Obligation (Figsco). Despite bad publicity, the market has moved in Goldman’s favour since the deal was first announced.

Moody’s says the Swedish Bankers’ Association recommendation that new mortgage loans amortise down to 50% of property value, from 70% currently, will help to slow the increase in household debt and is credit positive for Swedish banks and their covered bonds.

Coventry Building Society mandated leads to run a roadshow for its first euro denominated covered bond since October 2011. The deal is expected to offer a small premium to top UK names and is therefore likely to attract strong demand.

China is keen to step up the pace of internationalising the renminbi - and European governments are keen to help.

In an exclusive interview with Emerging Markets, Bank of Japan governor Haruhiko Kuroda insisted the policies of Abenomics were working, not hurting, and defended the ways the world’s big four central banks were operating monetary policy

The UK is gearing up to become the first government, apart from China, to sell a renminbi bond, in a deal that could come as soon as next week and be worth Rmb2bn.

The principle is clear: shareholders and creditors should bear risk of bank failures. Working out how to achieve that is the difficult part.

New issue momentum picked up in the RMBS market this week as one Dutch deal was priced and another was announced, along with a sterling deal from a UK bank. However, pricing softened as euphoria over the ECB’s purchase programme began to wane.