Trading and Investing

A news story for Bloomberg by Chris Fournier (April 26) paints a rosy picture of covered bonds' future prospects in Canada.

With a successful $1.5 billion covered bond from Royal Bank of Canada (RBC) coming hard on the heels of a landmark $2 billion issue from Canadian Imperial Bank of Canada (CIBC), Canada is currently the only game in town for U.S. dollar-denominated covered bonds.

Dr. Robert A. Eisenbeis is Chief Monetary Economist at Cumberland Advisors, an independent, fee-for-service money management firm. Prior to joining Cumberland he was the Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta. He is presently a member of the U.S. Shadow Financial Regulatory Committee and the Financial Economist Roundtable. 

The Royal Bank of Canada (RBC) made headlines when it became the first Canadian bank to sell covered bonds denominated in Canadian dollars (Oct. 29).  In contrast to earlier series, which were pitched towards Europe, fully 99% of this issuance was purchased within Canada.

RBC's Ken Mason, Senior Manager, Capital and Term Funding, answered some written questions from Covered Bond Investor™ as follows:

Why and when did RBC start thinking about issuing a new covered bond?  

In what the Wall Street Journal describes as an attempt "to muscle in on a business in which there are fewer banks competing than before the financial crisis," a midsized U.S. investment bank Monday (Oct. 19) announced the hiring of 17 additional traders and sales professionals.

In late July of this year, Covered Bond Investor™ briefly noted the fact that a French covered bond issuer, CFF (Compagnie de Financement Foncier) had applied to the Securities and Exchange Commission (SEC) for an order exempting CFF from provisions of the (U.S.) Investment Act of 1940 in connection with the offer and sale of its securities in the U.S.

A notice in the Federal Register (July 28) stated:

While the European covered bond market celebrates a record-breaking past week, Tim Skeet is looking ahead to new opportunities for this funding vehicle on the opposite shore of the Atlantic.

Tim SkeetIn a TV interview on CNBC Europe Friday (Oct. 2), Skeet said: "[As] we look into 2010, the U.S. market is the market of tomorrow for this product."

Germany's Eurohypo and Spain's Banesto price jumbo covered bond issuances ... Moody's looks at a proposal for covered bond legislation in Australia ... UBS plans to become a covered bond issuer ... and more.

Some items of covered bond news do not rate their own story in this publication—often because they relate to geographic areas outside our focus, North America.  Even so, readers who want to keep up with covered bond news in general might find them interesting.

The following is a public announcement from Eurex Bonds:

On Monday, 20^th July 2009, Eurex Bonds launched the new market model "auctions" for Covered Bonds and Government Guaranteed Bonds in a pilot scheme. The innovative approach, established in close consultation with dealers, vendors and covered bond organisations, captured the attention of media and market participants.

The following is a public announcement from Eurex Bonds:

The trading platform Eurex Bonds will enhance its trading model for selected covered bonds and government guaranteed bonds by means of the introduction of intraday auctions.