Spain

Ahorro Corporación Financiera’s Alex Sánchez-Pedreño turned quiz show host at the Euromoney Bond Investors Congress yesterday (Tuesday), presenting, for one day only, that Spanish housewives’ favourite, “How well do you know the Spanish savings banks?”.

The dislocation between credit news and secondary market spreads was highlighted last week by Standard & Poor’s upgrade of Banco Bilbao Vizcaya Argentaria from AA- to AA and Fitch’s downgrade of Düsseldorfer Hypothekenbank to the brink of junk. But this was just one of several clashes between perception and reality identified by analysts at the Marcus Evans covered bond conference late last week.

Soledad Nuñez, director general of treasury and financial policy for the Kingdom of Spain, said yesterday (Thursday) that she hoped to begin the public consultation on the secondary regulations supporting the update of Spain’s cédulas framework by the end of this month. She also decried what she said were misrepresentations of the country’s economic health, in particular the Spanish banking system’s supposed heavy reliance on the European Central Bank for liquidity.

The primary market’s calm this week has come as no surprise, but bankers are looking for clues to future activity and BankInter is regarded by some as having the necessary strength to reopen the Spanish market, with the multi-sellers finding little favour in the current market.

If recent reports are anything to go by, the Spanish banking system is on the brink of collapse. But this is far from the truth, even if cédulas issuers are adopting new strategies to cope with today’s irrational markets.

Analysts embarked on a perilous quest at the IMN covered bond conference in London yesterday afternoon. Armed only with data and pricing models, they set off in pursuit of relative value, pausing briefly to discuss adequate disclosure.

There has been speculation that BankInter and its leads are still trying to execute a transaction for the Spanish issuer in spite of the torrid conditions, with several market participants saying that they understood BankInter to be under time pressures in launching its inaugural cédulas hipotecarias, but The Cover understands that this is not the case, and that like other issuers with mandates outstanding, the banks is simply on the look out for opportunities.

Bad news hit French and German covered bonds this morning, stymieing issuance plans, but in spite of a sharp sell-off in equities one Spanish issuer is said to be close to launching the first cédulas of the year.

Apparently gentlemen prefer blondes but marry brunettes. Well from a performance perspective, investors should buy covered bonds from more volatile jurisdictions in the short run and then dump these for more stable products in the secondary market.

The UK government’s extension of guarantees relating to Northern Rock obligations on 18 December was seen as good news for covered bondholders. Moody’s downgraded Northern Rock’s bank financial strength rating from D+ to E+, but said that the extension “further underpins the Aa3 bank deposit and senior debt ratings”.

The Spanish parliament has approved the planned amendment to the Spanish covered bond legislation, which will come into effect the day after being published in the official state bulletin. Meanwhile, The Cover understands that a Eu3.5bn AyT Cédulas Cajas deal expected imminently will be mainly retained for liquidity purposes by the Spanish savings banks and partly privately placed with end investors.

Ahorro Corporación Financiera has decided to postpone any new AyT Cédulas Cajas issue, having last week mandated five banks to sound out investor sentiment towards a potential Eu1bn-Eu1.5bn three to five year deal.