UK

Deutsche Bank has retained its number one position in The Cover’s all benchmarks ranking at the end of the first half of the year, but whereas it had a comfortable lead at the end of the first quarter, Barclays Capital is now breathing down its neck.

In brief: Standard Life Bank has joined the throng of UK mortgage lenders turning to covered bonds, having incorporated Standard Life Covered Bonds LLP on Monday.

The steady flow of UK names creating covered bond programmes continued yesterday (Tuesday) with another building society registering entities necessary for covered bond issuance, while an existing issuer from the country bought back part of its outstanding bonds last week

“Spring being a tough act to follow, God created June,” quipped American boxing analyst Al Bernstein, and June will have a tough task repeating May’s Eu20bn of new issues. Market participants were confident that last Month’s pace could be maintained, although they were encouraged by redemption levels rather than divine providence. Meanwhile there were further hints of growing supply in the UK as another building society registered its programme.

Clydesdale Bank is set to join the cast of UK covered bond issuers, having incorporated Clydesdale Covered Bonds Limited Liability Partnership yesterday (Tuesday).

UK lender Bank of Scotland has sold a securitisation of residential mortgages to end investors for the first time since the credit crisis took hold.

Moody’s cut Alliance & Leicester’s long term credit rating from Aa3 to A1 yesterday (Wednesday), just days after the UK bank launched and retained the first issue from its covered bond programme. Meanwhile, Düsseldorfer Hypothekenbank has laid out its position in light of Fitch’s rating action last Friday.

Alliance & Leicester signed its widely expected Eu10bn global covered bond programme backed by UK residential mortgages yesterday, and appears to have already issued a £500m one year FRN from the facility.

The strength of an issuer’s domestic investor base has emerged as a key determinant of covered bond spreads since the crisis began last summer. Those that benefit have been able to relax, while those reliant on foreign investors have redoubled their efforts to penetrate new pockets of money.

The spread between obligations foncières and other French covered bonds has underlined the power of legislation, and the UK hopes its own new framework will pay off. But recent developments suggest a more complicated picture. The Canadian regulator, for one, has yet to be won over, and structured issuance in Germany has finally emerged.

The Investment Management Association has welcomed the final version of the UK’s Regulated Covered Bond framework, which came into force yesterday (Thursday). Its call for HM Treasury to rethink the initial draft was a key driver in the delay in implementation from the original January 1 target and its rewrite.

The covered bond market endured a rocky morning today, with spreads widening alongside heavy falls in equities, giving the European Covered Bond Council further food for thought ahead of its meetings in Milan later this week. But Germany could once again prove the exception in the primary market.