North America

Panellists at the American Securitization Forum conference in Las Vegas said on Tuesday that the credit crisis had opened up new opportunities for covered bonds in the US, even as it had called into question the idea that they are a rates product rather than a credit product.

In this roundtable, representatives of Canada's leading banks exchanged their views on the prospects for covered bonds in the country, and on how Canada’s economy, banking sector and mortgage market are very different from those of its neighbour.

Covered bonds are expected to be eligible for government guarantees under a planned extension of the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Programme (TLGP) that was announced on Friday.

Fitch and Moody’s on Friday downgraded Bank of America NA, the sponsor bank of its covered bond programme, with the latter cutting the bank’s rating for the second time in just over a week.

Danske Bank launched the first government-guaranteed deal for a Danish bank this (Wednesday) morning. Bayerische Landesbank opened books on a SoFFin-backed deal, while unguaranteed senior supply has reached new areas.

Moody’s yesterday (Thursday) downgraded the issuer rating of Bank of America NA, the sponsor bank of its covered bond programme, from Aaa to Aa1 and assigned a negative outlook to the new rating. The move follows the completion of the bank’s takeover of Merrill Lynch.

Outgoing US Treasury secretary Henry Paulson yesterday (Wednesday) said that covered bonds could contribute to maintaining a private sector secondary mortgage market in the US. However, he added that the credit crisis will have to be resolved before a US covered bond market is likely to be established.

Canada’s credit unions are setting up a covered bond programme that will take the multi-seller model developed in Europe to the North American marketplace. The project already has provisional regulatory approval and an advisor has been appointed.

Fitch yesterday (Thursday) upgraded from AA- to AA+ the WM Covered Bond Program, which JP Morgan took over from Washington Mutual in late September when the latter collapsed. The ratings were, however, constrained as a result of JP Morgan dispensing with a feature of the programme that WaMu had previously added to support the covered bonds’ ratings.

The Securities Industry & Financial Markets Association and the American Securitization Forum yesterday (Tuesday) announced the creation of the US Covered Bonds Council to develop and promote the market in the US.

The Securities Industry and Financial Markets Association held the inaugural meeting of the US Covered Bond Council steering committee in New York yesterday (Wednesday) afternoon. Meanwhile, a member of Sifma’s US covered bond traders committee has left his firm.

Federal Reserve chairman Ben Bernanke said that covered bonds had attractions for mortgage finance in the US in a speech on Friday on possible alternatives to Fannie Mae and Freddie Mac. However, he warned that competition from the Federal Home Loan Banks could stymie their development.