Rating news

• Cédulas retain ECB repo access, but further cuts to follow

  The axe of Moody’s has fallen on Cédulas as the agency continues its European wide review on financial institutions. Unlike their Italian peers, many Spanish covered bonds remain double-A rated, and all retain vital access to ECB funding while the primary market becomes ever more elusive.

Secondary market

• Periphery weakness unabated

  Secondary covered bond market activity this week has been dominated by the continuing uncertainty over the political and economic future of Greece which, along with ratings downgrades, has led to selling of Spanish and Italian covered bonds. And with 3CIF still weighing in on sentiment, French covered bonds have not come out unscathed.

RMBS primary news

• Santander UK raises £2.25bn

  Santander UK managed to raise £2.25bn of funding through its Fosse 2012-1 RMBS in a week when Eurozone storm clouds were gathering over the markets. The deal offered bonds across 10 tranches, five currencies and four maturities. And for the first time since 2007, it included double-A rated notes.

Market wrap

• Volatility dampens hopes despite yield hunger

  Real money investors are desperate for deals — but only from the right names, as volatility continues to rock the markets. European covered bond market participants are trying to deduce issuance prospects in the light of OP Mortgage Bank’s successful deal on Wednesday. While some are hopeful that the situation might now improve, others remain extremely doubtful.

Deal reviews

• OP could have been bigger and tighter

  OP Mortgage Bank could have easily raised more funding and at tighter levels for its €1.25bn covered bond this week, bankers told The Cover. The strength of demand for Wednesday’s deal was conspicuous at a very early stage, with investors willing to place orders as early as possible to secure an allocation.

Opinion

• 3CIF and AIB: a tale of two bonds

  Securitisation was blamed for causing the financial crisis that was triggered in 2007. But the technique must now be recognised for its potential to resuscitate fragile banks. There was a startling contrast in the market last week between two European issuers, 3CIF and Allied Irish Banks. At the very point that 3CIF was falling from grace, AIB glided, phoenix-like, back into the capital markets.

Regulatory developments

• MTS boosts trading with MiFID product

  Electronic bond trading platform MTS is beta testing a new Sponsored Access covered bond service, which is expected to comply with the extensive market transparency reform proposed by MiFID II. Secondary covered bond market turnover on MTS is growing fast this year, with double or even triple digit monthly percentage increase in volumes in its two existing trading models. Now with clients set to be offered a third, more regulatory compliant way of trading, prospects are likely to remain good.

In-depth analysis and interviews

• HSBC mandated to find a buyer for 3CIF

  This week’s shocking suspension of Caisse Centrale du Crédit Immobilier de France’s covered bonds from Euronext and the Luxembourg stock exchange has left capital market participants bewildered and angry.

Mandates & deal pipeline

• Nykredit ready for rare euro launch

  Nykredit Realkredit on Tuesday finished a roadshow for its first euro benchmark junior covered bond since 2010. Some continental buyers are unfamiliar with the structure, and past deals have been priced far closer to senior than covered levels. However, Denmark’s largest mortgage lender rarely issues in euros, and a high spread and lack of alternative investment opportunities could draw a healthy mix of credit and rates buyers.

Analyst research

• Rising unemployment threatens Spanish mortgages

  Rising unemployment in Spain could hit residential mortgage portfolios, JP Morgan analysts have warned. An increase in non-performing loans would affect Spanish cover pools, while a lack of adequate measures to deal with mortgage losses means subordinated bondholders could be called on to provide additional capital.

People moves

• HSBC’s Porter moves to Canada

  After four years running HSBC’s global push into the covered bond market, Andrew Porter is moving to new pastures. Following the Easter break, he will relinquish his position as global head of covered bonds, based in London, to head the bank’s DCM operations in Toronto.