North America

Canadian issuers will no longer be able to use insured mortgages as collateral for covered bonds. Finance minister Jim Flaherty introduced a bill into the Canadian parliament on Thursday that will create a register for covered bond issuers. The bill will also prohibit the use of mortgages insured by private insurers or by the government backed Canadian Mortgage and Housing Corp (CMHC).

Norway’s Sparebank 1 Boligkreditt became the third European issuer to bring a five year dollar deal in the last two weeks, with all three deals offering the same spread. Also in North America, the Canadian government released its 2012 budget, though details of prospective covered bond legislation remain scarce.

Prudential Insurance in the US has priced a $1bn dual recourse structure that is secured on a pool of legacy sub-prime RMBS but also benefits from a guarantee from the insurance company. Although it has a bullet structure, the cash flows are passed through to noteholders and are sufficient to ensure timely payment of the principal and interest.

Dollar issuance continued its record breaking run on Tuesday, as UBS launched its second benchmark of 2012 in that currency. Sterling and dollars have had record first quarters, though euro supply remains subdued.

Hopes that the US covered bond bill would be passed as soon as this year were dashed last week after it emerged that the US Senate approved the Jumpstart Our Business Startups Act – but crucially without an amendment that included the covered bond bill.

Toronto Dominion Bank raised $3bn of five year funding off a well subscribed book 6bp tighter than a recent trade from Canadian peer Caisse Centrale Desjardins du Quebec.

The global covered bond market continues to look strong, with a trio of issuers collectively raising the equivalent of more than €4.5bn, on the back of more than €9bn in demand across two currencies. But whether the market’s euphoria can hold out until the end of this week, however, remains to be seen as doubts are starting to creep back in with Thursday’s Greek liability management cut off date fast approaching.

The covered bond market remains extremely well supported, with recent deals all performing well and secondary flows largely one way. Commonwealth Bank of Australia and Toronto-Dominion have mandated for dollar trades. Yorkshire and Coventry Building Societies have left blackout but could turn to sterling. Bankinter has mandated in euros but is biding its time while Cédulas spreads tighten. ING DiBa is expected soon after roadshowing last week.

Caisse Centrale Desjardins du Quebec priced its second ever covered bond at the tightest level for a Canadian issuer this year. The $1.5bn 144a/Reg S trade attracted $2.25bn orders from 45 accounts on Tuesday, after over a month without Canadian supply.

Bankers and lawyers have warned against over-interpreting the effects of imminent US legislation on covered bonds from the UK and elsewhere. The proposed US law may not hit covered bond structures that use SPVs, as industry bodies fear, they told The Cover.

Government owned Canada Mortgage and Housing Corp (CMHC) is approaching the statutory limit on the amount of residential mortgages it can insure. And, with the Canadian authorities keen to reduce the mortgage market’s reliance on the State, it is possible that draft covered bond legislation – that could be out as early as next month – excludes the use of CMHC-insured mortgage loans.

Bank of Montreal (BMO) seized on robust US demand for Canadian covered bonds, printing $2bn of five year notes on Monday. The deal brings total US dollar issuance this month to $6bn from three deals, a record for January.