UK

The Financial Services Authority's addition of seven programmes to its Regulated Covered Bonds Register yesterday (Tuesday) has been welcomed, but is expected to have limited impact in the short term given the more immediate concerns of the market.

Although the government guaranteed bank bond sector is maturing in the UK, the impact of broader issuance on the rest of the fixed income market has yet to fully play out, with the sovereign, supranational and agency sector throwing up new pricing surprises and some countries just beginning to gear up for issuance. Another shocking level appeared on screens only this (Monday) morning.

Bank of Scotland launched the first government guaranteed bank deal from an established covered bond issuer yesterday (Wednesday). But even as the dust settled in the wake of the new asset class’s impact on the bond markets, the way forward for covered bonds was no clearer.

In brief: Royal Bank of Scotland has appointed Allen Rad head of covered bond trading. The Cover revealed in July that he had left Dresdner Kleinwort to join the UK bank.

The Financial Services Authority’s announcement yesterday (Thursday) of a review of its position on covered bonds is believed to have been prompted by the unprecedented interplay between covered bond structures, deteriorating cover pools, central bank funding and rating methodologies that the crisis has thrown up.

HM Treasury said yesterday (Wednesday) afternoon that UK covered bonds are not within the scope of the government’s guarantee scheme, as anticipated by The Cover. The Treasury’s explanation suggests that it may believe that a guarantee is unnecessary for issuers to restart covered bond issuance.

In brief: Leeds Building Society has executed what is believed to be its first covered bond, while French issuers have been tapping some outstanding issues.

HM Treasury is expected to announce shortly that UK covered bonds will not be included in the bank debt that can qualify for a government guarantee. Meanwhile Barclays Bank this (Wednesday) morning launched the first public government guaranteed bond.

Clydesdale Bank has issued the first covered bond off a Eu9bn programme, a £1.85bn January 2012 deal.

In brief: Chelsea Building Society has executed the first covered bond issue under a Eu5bn programme, a £1.25bn three year deal. Meanwhile Alliance & Leicester has printed its second issue.

The UK’s Lloyds TSB gave the banking sector a surprise lift this morning by announcing a benchmark senior unsecured 10 year sterling issue that is not being launched under the guarantees recently extended to many European banks’ short dated issuance. The £400m deal promises an unexpectedly quick resumption of financial institutions issuance and, by showing that unguaranteed issuance has an immediate role in bank funding, is a positive sign for the covered bond market.

Fixed income investors and bankers applauded the UK government's rescue plan this week, hoping that the solution could help solve the capital and liquidity crisis, at least in the UK. This EuroWeek/The Cover article examines its implications for debt issuance and the issues that remain unclear, including the fate of covered bonds.