Ireland

The European bond market is bracing itself for a pick-up in guaranteed senior unsecured issuance from a wider range of jurisdictions as banks put the final touches to their new documentation and regulators release precise details of their respective guarantees.

Although the government guaranteed bank bond sector is maturing in the UK, the impact of broader issuance on the rest of the fixed income market has yet to fully play out, with the sovereign, supranational and agency sector throwing up new pricing surprises and some countries just beginning to gear up for issuance. Another shocking level appeared on screens only this (Monday) morning.

After the outcry over Moody’s two covered bond downgrades on Tuesday, The Cover spoke to the rating agency to find out the thinking behind them. But rather than focus on its much-discussed timely payment indicator, Moody’s instead offered a refresher course on other elements of its methodology.

Not for the first time this month, analysts have been trying to get to grips with Moody’s rating actions, this time the downgrade of Depfa ACS Bank’s public sector covered bonds and Hypo Real Estate Bank International’s mortgage Pfandbriefe yesterday (Tuesday). Affecting more than Eu50bn of outstanding covered bonds, the downgrades are the most significant in the market since the crisis struck in summer 2007, but one analyst even called them irresponsible.

In brief: As The Cover was going to press, Moody’s was announcing downgrades to two classes of covered bonds of Hypo Real Estate group, including Depfa. It cut Depfa ACS Bank’s public sector asset covered securities from Aaa to Aa1 and HRE Bank International’s mortgage Pfandbriefe from Aa2 to Aa3.

Moody’s, Standard & Poor’s and Fitch yesterday (Tuesday) took rating actions on the covered bonds issued by Hypo Real Estate group entities following its bailout with a Eu35bn credit facility from the German government and banking industry on Monday. [Updated to correct existing Moody's ratings.]

Bo Heide-Ottosen, the Hypo Real Estate Holding and Depfa board member central to the group’s treasury and public finance activities, has left the group in the wake of its rescue by a consortium of German banks and the German government.

Covered bonds issued by Allied Irish Bank, Bank of Ireland and Anglo Irish Bank were boosted today (Tuesday) by the Irish government’s decision to set up guarantee arrangements for local banks. The arrangement does not, however, affect the asset covered securities of Depfa ACS Bank or WestLB Covered Bond Bank.

Investors’ perceptions of the crises in Spain and Ireland are excessively pessimistic because of the way the media reports them, according to bankers at the Euromoney/ECBC Covered Bond Congress in Paris on Thursday.

After launching its first UK covered bond issues backed by UK mortgages, Bank of Ireland told The Cover that, sitting alongside its Irish asset covered securities issuance, the new programme will give it greater funding flexibility.

Bank of Ireland has set up a Eu15bn UK mortgage covered bond programme under which it has launched eight series with a volume of £500m each.

Bank of Ireland has set up three covered bond related vehicles in the UK, The Cover has learnt, suggesting that it could be setting up a programme under UK legislation. The bank already issues Irish asset covered securities through Bank of Ireland Mortgage Bank.