North America

CIBC has mandated ABN Amro, CIBC, Commerzbank, Merrill Lynch and HSBC to lead manage its debut covered bond. The bank will be roadshowing late this month.

When Don McLean sang “Bye-Bye, Miss American Pie” he was apparently expressing his feelings on the transition from the innocence of childhood to the darker realities of adulthood. Covered bond issuers at the Euromoney US Covered Bond Investor Forum in New York earlier this month faced up to a similar mood of disillusionment.

Ronald Reagan once famously declared: “There are no such things as limits to growth, because there are no limits on the human capacity for intelligence, imagination and wonder.” Covered bond issuers and regulators at the Euromoney US Covered Bond Investor Forum in New York last week may not be as unconstrained in their hyperbole as the former US president and star of hit film Bedtime for Bonzo, but they enthused how covered bonds could grow in the face of regulatory limits and their interaction with retail depositors.

Comments from a Federal Deposit Insurance Corporation official that it would be acting fairly quickly to give regulatory clarity on the status of covered bonds in the US were welcomed by delegates at the Euromoney US Covered Bond Investor Forum in New York last week. However, there was disagreement as to whether attempts to introduce legislation would do harm or good.

US Treasury secretary Hank Paulson came out as the latest convert to covered bonds yesterday (Thursday), saying that they could help address some of the problems in the US mortgage finance industry that have come to light in the subprime crisis.

Representatives of BlackRock, the Tennessee Consolidated Retirements System, and TIAA-CREF delivered their verdicts on covered bonds at the Euromoney US Covered Bond Investor Forum yesterday (Wednesday), and, with apologies to Mr Clinton in this election year, their views could be summed up by the slogan: it’s the liquidity, stupid.

Moody’s Investor Services has downgraded Washington Mutual’s covered bonds from Aaa to Aa1. With concerns over the US housing market hardening, Fitch and Standard & Poor’s (S&P) have cut the rating of the bank itself and its ratings remain on their watch lists with negative implications.

The spread between obligations foncières and other French covered bonds has underlined the power of legislation, and the UK hopes its own new framework will pay off. But recent developments suggest a more complicated picture. The Canadian regulator, for one, has yet to be won over, and structured issuance in Germany has finally emerged.

The euro market has been closed to US issuers since the subprime crisis struck and European issuers have stayed at home after their successful transatlantic visits in early 2007. But the turmoil has made the US authorities look again at the merits of covered bonds and the noises coming out of Washington are encouraging.

Canadian Imperial Bank of Commerce’s planned covered bond programme will be backed solely by mortgages insured by Canada Mortgage & Housing Corporation, making it the country’s first public sector-backed issuance, in a sign of how banks are adapting their issuance to the new market environment.

Canadian Imperial Bank of Commerce plans to roadshow a new covered bond programme early in the second quarter, following in the footsteps of not only those officially in the pipeline, but a variety of other issuers who have been visiting investors but adopting a lower profile.

Some market participants are concerned that the policy statement that the Federal Deposit Insurance Corporation is drafting could be too restrictive on the amount of covered bonds US banks can issue. Meanwhile, the American Securitisation Forum has been lobbying the regulator to put forward the product’s case.