UK

Three issuers announced mandates this (Monday) morning, ensuring that the pipeline remains bulging even after three issuers closed books on new issues, as the pace of supply showed no sign of relenting in the second week of the new year.

Standard & Poor’s has taken the first actions under its new covered bond rating methodology, affirming six programmes’ AAA ratings.

Next week promises to be as busy as this week’s record opening to a year, with two more issuers having officially announced plans for benchmarks in the past 24 hours on top of three outstanding mandates. Supply of Eu5.5bn yesterday (Thursday) took the week’s total to Eu10.25bn from seven deals, just short of the eight totalling Eu11bn in the busiest ever week for the covered bond market at the end of September.

With four new jumbos hitting the market this (Thursday) morning, the number of benchmark issues this week is second only to the last week of September. However, investors have expressed disappointment about what they called expensive spread levels.

Fitch on 22 December affirmed Northern Rock’s covered bonds at AAA based on its revised criteria for assessing liquidity risk in covered bonds, without giving credit to a guarantee for the covered bonds provided by the UK Treasury.

Fitch today (Friday) affirmed the AAA rating of Bradford & Bingley’s covered bonds, on stable outlook, based on a guarantee from HM Treasury.

Moody’s has updated its approach for analysing set-off risk in UK covered bonds and securitisations, but the revised methodology will not have any rating impact on these, except for credit card master trust transactions, the rating agency said yesterday (Thursday).

Fitch is keeping Northern Rock’s AAA covered bond ratings under analysis pending an announcement of the final terms of the UK government’s guarantee of the bank’s covered bond obligations and any steps taken to support the covered bonds’ credit rating, the agency said yesterday (Wednesday).

The UK government will hold a consultation in early 2010 on potential supplementary rules for Regulated Covered Bonds, it was announced in the Pre-Budget Report yesterday (Wednesday). Covered bonds are also referenced in a consultation paper on strengthening capital standards released by the Financial Services Authority today (Thursday).

The UK authorities’ commitment to safeguarding covered bonds from any potential negative consequences of the 2009 Banking Act was recently underlined by Andrew Bailey, who has been responsible for the Bank of England’s interventions in the banking sector during the crisis and heads its Special Resolution Unit.

Standard Life Bank has increased the overcollateralisation of its covered bond programme to a level that Moody’s considers consistent with a Aaa rating, where the covered bonds were affirmed yesterday (Monday).

The UK Treasury will ensure that timely payments are made to Northern Rock covered bondholders, it said today (Tuesday). Other secured creditors and holders of the bank’s Granite securitisations will not benefit from a government guarantee.