United States

Plans for US covered bond legislation have been included in the House of Representatives’ offer to the conference responsible for coming up with a financial reform bill unifying the versions approved by the Senate and the House.

Standard & Poor’s has downgraded WM Covered Bond Program from AAA to AA and assigned it a negative outlook under its revised covered bond rating methodology.

BNP Paribas priced the biggest benchmark covered bond since the middle of April yesterday (Wednesday) to wrap up the busiest day in the market since then, with Sparebanken Vest and Dexia Kommunalbank Deutschland also taking half a yard each out of the market.

Three issuers launched euro covered bonds this (Wednesday) morning ahead of a public holiday in many parts of Germany tomorrow, with market conditions said to be better than yesterday, although still weak. Meanwhile, the US market could see its first new covered bond supply since mid-April.

Standard & Poor’s downgraded Bank of America’s covered bonds from AAA to AA, on negative outlook, yesterday (Wednesday) following a review of the programme under the rating agency’s revised criteria, because of insufficient credit enhancement.

Covered bonds could yet play a part in US financial reform legislation that is shortly to be finalised, despite not having featured in either of the relevant Senate or House of Representatives bills.

Standard & Poor’s has said that a covered bond bill introduced in the House of Representatives in March addresses an important aspect of its rating methodology, but would not necessarily improve the position of US covered bonds within its key country categorisation.

A bipartisan initiative to include covered bond legislation in the Senate’s financial regulatory reform bill is underway, according to a letter on Friday from Republican Congressmen who have been lobbying for the asset class in the House of Representatives.

Compagnie de Financement Foncier priced a $2bn three year obligations foncières issue yesterday (Thursday) and achieved a long-held goal of accessing the US investor base by selling it 62% of the new covered bond.

Royal Bank of Canada is expected to price a $1bn minimum five year deal this (Wednesday) afternoon in only the second benchmark covered bond to have been targeted at US accounts since July 2007.

The possibility of post-issuer-insolvency covered bond estates raising liquidity from Federal sources has been dropped in the latest draft of US covered bond legislation, but is not a serious blow to the strength of the proposed framework, according to market participants.

Treasury Secretary Timothy Geithner said that consideration of covered bonds would be an important part of looking at the US reform agenda during a House Financial Services Committee hearing yesterday (Tuesday).