Europe

Human rights campaigners have warned the EBRD about a renewed anti-democratic clampdown by Turkmen president Gurbanguly Berdymukhammedov

Kazakhstan’s relative transparency and sound fiscal management should enable it to become a regional powerhouse, but it needs to diversify away from commodities, one of the country’s leading economists told Emerging Markets

Bayerische Landesbank began taking indications of interest for a benchmark public sector Pfandbrief, expected to be priced on Thursday, which could end the mysterious drought in the covered market.

Secondary market activity has been focused on Spain lately with end account selling noted in multi-cédulas and single names which, among others, have included BBVA. Though it’s technically possible for the issuer to bring a deal flat to the underlying government, some bankers think that the funding window may have passed, albeit temporarily.

Spain’s Caja Vital Kutxa brought an inaugural covered bond issue to market on Monday, launching a Eu200m no grow trade through joint leads Bilbao Vizcaya Argentaria and Natixis.

Fitch placed 25 classes of multi-issuer cédulas hipotecárias on rating watch negative on Monday, because cédulas hipotecárias issued by Caja de Ahorros del Mediterráneo (CAM) form part of their collateral.

Moody’s took rating action on the covered bonds of three issuers on Monday, downgrading the deals issued by Santander Totta, and Caxia Geral de Depósitos, while placing those issued by Marfin Popular Bank on negative review.

Struggling German bank, WestLB is lining up the sale of its pfandbrief issuing subsidiary, West Immo, to US investment firm Apollo Investment Management. Covered bond analysts suspect the sale will have a negative impact on the ratings of West Immo’s Pfandbrief but the sale is more likely to be a positive for WestLB itself. In any case, West Immo’s covered bonds, which have tightened over the last month, remain well supported.

Existing measures to prevent liquidity risk hamper borrowers’ use of covered bond funding, according to Barclays Capital research. Mechanisms in place to combat liquidity risk in an asset segregation event have not been appropriate to recent events, it said, and can restrict issuers’ use of covered bond funding during critical periods.

Monday was another quiet day for the covered bond market, though syndicate officials remained confident mandates would come. Market participants stressed that covered bonds were not the only asset class where supply was scarce, and were hopeful that as issuers leave blackout and investors become increasingly cash rich, issuance was only a matter of time.

Ratings uplifts for senior long-term debt issued by German Landesbanks could be a thing of the past. Moody’s research suggests the support structures for Landesbanks in distressed situations are not the same in a Basel III, post-crisis world. As a result, the covered bonds issued by some Landesbanks could come under rating pressure.

Fitch has explained how its new covered bonds counterparty criteria, published in March, might affect covered bond ratings of UK banks. The agency sees temporary liquidity shortfalls as the highest risk to covered bond programmes, so UK banks will have to show a commitment to improve their liquidity reserves, or risk a ratings downgrade.