UK

Northern Rock has been trying to play down the significance of its first public post-crisis securitisation, a £1.5bn prime RMBS. The state-owned bank was rescued by the UK government in 2007— the bank was heavily dependent on wholesale funding and struggled to finance itself when ABS markets packed up. Its reliance on securitisation was widely blamed for the bank’s fall from grace.

The debate around cover pool transparency has once again reared its head after M&G Investments warned that “not all covered bonds are alike and while some are exceptionally strong, the opaque structure of many others could harbour unwelcome surprises for investors.”

Deutsche Bank, JP Morgan and Royal Bank of Scotland will sell Northern Rock’s first public post-crisis securitisation, a £1.5bn prime RMBS. The deal will be issued through Gosforth Funding 2011-1, which will be a standalone static pool deal.

US dollar denominated covered bond issuance is set for growth, as demand is far outpacing supply, regardless of whether a US law is put a law in place, and European issuers are lining up deals for launch. Funding executives from many institutions explained their strategies at the 3rd Euromoney US Covered Bond Investor Forum on Wednesday this week.

JP Morgan and Royal Bank of Scotland have closed books on Skipton Building Society’s Darrowby No1 Funding, a UK prime RMBS. The long four year piece was priced broadly in line with UK covered bonds launched earlier this year, albeit its duration was shorter.

Though primary market activity remains muted, the pipeline continues to grow despite headline risk. A string of mandates for US dollar deals are expected, along with a sterling transaction from Barclays.

RBS priced its second euro denominated covered bond deal of the year on Tuesday, a transaction notable for its particularly granular book and attractive pricing relative to where it would have funded itself in the senior unsecured market.

Skipton Building Society’s Darrowby No 1 is set to be the next UK prime RMBS deal to hit the market. Rabobank is marketing its latest Strong RMBS and Veneto Banca is pricing tomorrow.

The primary market has got off to a very strong start, with books building on as many as four deals across four jurisdictions. The transactions, which include two tier two borrowers from peripheral markets, have attracted a total of 440 orders worth a combined Eu8bn. The strong showing bodes well for new peripheral tier two borrowers who are said to be lining up with deals this week.

Abbey National sold a £1bn 15 year benchmark on Monday in a deal that was more than twice oversubscribed and tightened strongly after pricing.

Abbey National sold a £1bn covered bond on Monday, bringing total year to date issuance in that currency to £3bn. Sterling covered issuance in 2011 is already four times greater than last year’s £750m total, according to Dealogic data.

The covered bond market remains primed for issuance despite the quietest week so far this year in terms of primary market activity. Spanish borrowers may join Abbey National and Westpac New Zealand in the market next week, though Abbey’s inaugural sterling issue and Westpac’s first covered bond transaction are set to take centre stage.