Italy

Italian Banca Monte dei Paschi di Siena S.p.A (Monte) has changed the structure of all its outstanding covered bonds from hard bullet to conditional pass through (CPT). The success of the consent solicitation may encourage others to follow.

Moody’s positive rating action on German and Italian covered bonds will help improve structural demand for selective programmes. However, with Fitch still rating many programmes at a lower level the full benefit will be muted.

Banca Monte dei Paschi di Siena (BMPS) could soon become the fourth bank to issue conditional pass-through covered bonds. It has announced a consent solicitation to amend the maturity structure of its existing soft bullet covered bond programme, which according to Moody’s will result in a rating upgrade.

The covered bonds of Banca Monte dei Paschi di Siena (BMPS) rallied by 20bp on Friday as speculation mounted that Fitch would not downgrade the bonds to sub-investment grade, as had been feared.

UniCredit’s covered bond research analyst, Florian Hillenbrand, will move to the buyside as a portfolio manager with UniCredit AG from early May.

Nationwide and Caixabank launched long dated deals on Wednesday. Even though both trades were fairly priced, this part of the curve was heavily supplied. The deals also suffered from a widespread market malaise, partly stemming from renewed concerns over Greece. But Nationwide's was undoubtedly the stronger deal, being more appropriately sized and priced. It was also placed with high quality private investors, in stark contrast to the Spanish deal.

Euro covered bond issuance could be poised to moderate next week, though it is still likely that one or two deals could emerge at short notice. Issuers outside Europe are less inclined to bring euro benchmarks as a change in the basis swap with dollars has reduced the difference in the cost of funding.

UniCredit issued its inaugural conditional pass through covered bond on Thursday and despite the new structure, the final spread was flat to where it would have priced a deal from its soft bullet programme. The head of group strategic funding emphasised the deal’s rating stability as the key attribute and not its collateral efficiency.

UniCredit has mandated leads for the first deal to be issued off its newly restructured conditional pass through (CPT) covered bond programme, and is expected to launch the deal on Thursday.

The primary market sprang back to life on Tuesday, as covered bonds from lower rated issuers in Germany and Italy attracted books that were many times covered. The successful outcomes illustrated that the market was not concerned about the outcome of negotiations on the extension of the Greek debt bailout or the prospective timing of the first US rate hike.

With investors squealing at this week’s new issues that crunched spreads to record lows, next generation covered bonds could meet the sector’s increasingly desperate need for higher yielding products. Both conditional pass through (CPT) and dual recourse structures backed by small to medium sized enterprise loans or infrastructure projects are under way, bankers report.

UniCredit Italy has mandated leads to market its newly restructured conditional pass through (CPT) Obbligazioni Bancarie Garantite covered bond programme and says that a deal may follow.