Europe

The former Dexia Municipal Agency, now Caisse Française de Financement Local (Caffil), is considering whether to appeal against a French court judgement over three structured loans it made to a local authority. With as many as €10bn of similar loans in its €70bn collateral pool, the market is watching developments closely.

Changes to Spanish mortgage law will not lead to lower overcollateralisation, as the rules will only apply to new loans, Fitch said on Tuesday, contradicting an earlier statement from Moody’s.

Stadshypotek’s inaugural sterling covered bond not only achieved great investor diversification, but also provided exceptionally cheap funding, sending a strong message to other foreign issuers who may be looking for something similar.

The G20 will meet at the end of the week and most likely they will discuss currency wars. But weakening currencies may be a good thing

Sweden’s Stadshypotek gave the primary covered bond market a surprise injection of liquidity on Monday morning when it opened books for its first sterling deal. In contrast to many covered bond issuers, it has diversified across a wide range of currencies in the last two years so the addition of a sterling deal was a natural progression.

The ABS and covered bond worlds have come closer together after Fitch had to explain its rating methodology for Commerzbank's SME structured covered bond programme. The rating agency will apply covered bond criteria to the pioneering programme, even though the bonds will have ABS like features. The news follows an upgrade of Banca delle Marche’s covered bonds after they were cross-fertilised with structured finance technology.

The number of bullish investors in emerging markets remains sizeable, but the bullish bias is weakening, a poll by Societe Generale shows

Spanish government bonds performed well on Friday but long term concerns about the outlook for Spain are spooking traders who are increasingly willing to consider leaving illiquid Cédulas shorts uncovered. In core markets, traders are focused on the Bund swap spread and suggested that a potential sell off could be accompanied by a spread tightening.

Moody’s has upgraded Caisse Francaise de Financement Local’s covered bonds to Aaa from Aa2, following a similar move by Standard & Poor’s. The upgrade came after all three major rating agencies rated CFFL’s holding company, Société de Financement Local (SFIL) double-A. CFFL’s previous owner Dexia Credit Local was rated Baa2.

Fitch placed SNS Bank's mortgage covered bonds' AA+ rating on Rating Watch Evolving (RWE) on Wednesday, a day after revising its outlook on Netherlands from stable to negative. Despite this, SNS bank’s covered bonds have rallied strongly since last Friday and have the potential to perform further.

As fears of a breakup of the eurozone receded and good news on economic data became more frequent, investors moved out of 'safe' bonds

Plans to amend Spanish mortgage law will hit covered bond investors and could limit credit flow into the country, Moody’s warned on Monday, as they will weaken lender recourse to borrowers, and lower the level of over-collateralisation.