UK

Citi has lost one of its covered bond specialists, leaving the firm’s FIG team to take responsibility for the secured funding product. The move comes amid suggestions that other banks could look to do the same in order to reflect the covered bond market’s shift from being a rates product to a more credit-orientated instrument.

Barclays raised €750m from two taps at either end of the curve, in spite of increasing concern that Standard & Poor’s could downgrade France, several other European countries, and the EFSF.

Covered bonds will become an increasingly important bank finance tool in 2012, but their growing stature will not offset a continued downward ratings migration, Moody’s said in its 2012 outlook. The sovereign debt crisis will heap more pressure on issuer ratings and increase refinancing risk, particularly in Italy and Spain but also in core Europe.

The UK’s FSA has unveiled its policy on regulated covered bonds. It has made the case for loan level data provision and said why stratification is not good enough, in its newly-released policy document.

UK issuers approach 2012 sporting a strong domestic investor base and a tightened framework, having retained market access through some of the most volatile periods of 2011.

Markets stabilised on Tuesday morning following S&P’s announcement that it may cut sovereign ratings across the eurozone, ending three days of sovereign tightening. Overall the tone remains constructive, according to covered bond traders, with better buying in French and peripheral covered bonds. But with only a couple of weeks of trading to go before year end, and covered bond spreads not following sovereigns tighter, issuers are still most likely to wait for an opportunity in January.

HM Treasury has released its review of the UK’s regulatory framework for covered bonds. It includes responses to its April consultation paper and details changes to the UK’s Regulated Covered Bond (RCB) framework, aimed at improving transparency and making the UK market more comparable with other European jurisdictions.

National Australia Bank’s UK Clydesdale Bank subsidiary looks set to undertake its first wholesale mortgage financing exercise since 2007 in the RMBS market, as opposed to covered bonds. The borrower had roadshowed a newly set-up covered bond programme in summer, but this has since been sidelined. The RMBS funding is not only more cost efficient but also less onerous from a ratings perspective compared to a covered bond.

ECB purchasing reached €930m on a settlement basis by the end of last week, with traders reporting buying of German, French, and some Spanish paper in the secondary market. The impact of the programme remains limited, however, and there have been calls for the eurosystem central banks to make bonds purchased under the programme available for bilateral repo purposes.

Australia and New Zealand Banking Group priced the first Australian covered bond on Tuesday, launching a benchmark dollar trade that attracted broad demand and a healthy level of oversubscription. Meanwhile RBS has opened books on the week’s second euro benchmark, though given the jurisdictions concerned CBPP2 remains unable to support the primary market.

News of the ECB’s latest covered bond purchase programme has failed to move secondary spreads, analysts and syndicate officials told The Cover on Monday. Meanwhile the situation in peripheral jurisdictions continues to deteriorate, making the programme’s success all the more contingent upon concrete political resolution in the individual countries, and Europe as a whole.

The ECB’s quest to bring loan-level disclosure to the European ABS market moved forward on Tuesday, with technology and data firm Sapient Global Markets appointed to build the database providing loan-level data to the market. The announcement comes as covered bond borrowers grapple with the provision of far less onerous transparency initiatives being demanded by investors.