North America

The US authorities’ intervention to stop Fannie Mae and Freddie Mac from failing and other positive news today (Monday) has been welcomed, but appears unlikely to be sufficient to encourage any jumbo covered bond supply this week. It could, however, let investors sleep easier in their hammocks.

If the US covered bond market is going to achieve the goals held out for it by the Treasury and others, it will need to win around a key constituency that has so far only engaged minimally with the asset class: US investors. The Cover asked John Cerra, managing director at TIAA-CREF, for his views on developments in the US and whether he could be won round to the product.

The Federal Deposit Insurance Corporation is expected to release its final covered bond policy statement next Tuesday (15 July), when it holds its monthly board meeting. The move should pave the way for the US Treasury to take the initiative and come out with its own policy on covered bonds.

Treasury Secretary Henry Paulson reiterated his interest in covered bonds playing a part in the US mortgage market at a Federal Deposit Insurance Corporation conference yesterday (Tuesday). The Treasury has meanwhile followed up its recent Washington gathering with further, more focused discussions.

In brief: The Co-operative Bank is the latest UK financial institution to have turned to covered bonds, setting up The Covered Bond LLP.

*Excludes German, French, Spanish and Nordic issuance.

McKee Nelson announced this week the creation of what is believed to be the first covered bond team at a US law firm. The Cover spoke to partner Kenneth Marin about the rationale for the move and its expectations for the US covered bond market.

Many government interventions since the subprime turmoil erupted last summer have been ill-advised and/or unwelcome. The US Treasury’s decision to get involved in the country’s stalled covered bond market is neither.

In brief: Barclays Bank has issued what are understood to be its first covered bonds, two £1bn (Eu1.26bn) floating rate notes. The bank is the latest UK issuers to have placed large sterling floaters since the Bank of England’s Special Liquidity Scheme (SLS) was established in April.

In brief: US law firm McKee Nelson is gearing up for the anticipated growth of issuance in the country with the creation of what it says is the first dedicated covered bond team in the States.

Critical assurances on the position of covered bonds in receivership and greater flexibility on eligibility criteria are two key demands of respondents to the Federal Deposit Insurance Corporation’s consultation on its proposed policy statement. The American Securitization Forum and Bank of America were among those getting their responses in ahead of this week’s deadline.

Washington Mutual has criticised Moody’s for a lack of understanding of the FDIC receivership process in its comment letter to the regulator regarding the planned US covered bond policy statement.