North America

A resurgence of US targeted benchmark covered bond supply this year was welcomed by issuers and investors at the ECBC/Euromoney Covered Bond Congress in Zurich last week, with the buy-side airing a series of recommendations as to how the market could expand.

A Senate Banking Committee hearing on covered bonds yesterday (Wednesday) showed that the success of initiatives to establish covered bond legislation in the US appears to hinge on lawmakers’ ability - if indeed it is possible - to reconcile calls from the Federal Deposit Insurance Corporation for flexibility in its handling of covered bonds in the event of receivership with legal certainty for issuers and investors.

GCE Covered Bonds announced a mandate for a new covered bond this (Wednesday) morning, but otherwise the primary market was quiet after yesterday’s five euro benchmarks and one dollar issue.

The Senate Committee on Banking, Housing & Urban Affairs will hold a first hearing on covered bonds next Wednesday (15 September).

Treasury Secretary Tim Geithner referred to covered bonds in opening remarks at a conference on the future of housing finance in the US held yesterday (Tuesday) by the Treasury and Department of Housing and Urban Development (HUD).

A poll of delegates at a recent Moody’s investor briefing found almost half to be sceptical about covered bonds being a viable alternative to residential mortgage-backed securities in the US. However, in a discussion that followed, panellists argued that the asset class could prove complementary to RMBS.

The version of the US Covered Bond Act of 2010 passed by the House Financial Services Committee last month will help investors, according to Moody’s, but does not adequately deal with market value risk and could lead to different standards for different types of issuers.

The House Financial Services Committee passed the United States Covered Bond Act of 2010 yesterday (Wednesday) in a quick markup after some concessions were made to the Federal Deposit Insurance Corporation. However, a compromise over how overcollateralisation should be treated has not yet been reached.

Canadian Imperial Bank of Commerce took its covered bond funding in the US market this year to $4.25bn (Eu3.27bn/C$4.39bn) yesterday (Tuesday), increasing its two outstanding 144A issues by a combined $1bn. Meanwhile, French taps in euros continued with Banques Populaires Covered Bond.

The House Financial Services Committee has scheduled a markup for tomorrow (Tuesday) of an amended version of the United States Covered Bond Act of 2010. The new language is understood to take into account some concerns raised by Senators who in June rejected a proposed covered bond amendment in the Dodd-Frank Act, and appears to be designed to deal with the Federal Deposit Insurance Corporation’s opposition to key provisions of the bill.

Toronto-Dominion launched a $2bn five year inaugural covered bond yesterday (Thursday), becoming the fifth Canadian bank to tap the dollar market with a covered bond this year. Compagnie de Financement Foncier today launched the fourth euro tap of the week, increasing its recent 15 year deal by Eu450m.

Bank of Nova Scotia priced a $2.5bn (Eu1.96bn) three year covered bond yesterday (Thursday) that is the second largest ever dollar covered bond and the largest fixed rate single tranche dollar issue from a Canadian bank in any format, according to data from Dealogic. In euros activity has been confined to taps.