Global Covered Bond News Roundup - Week Ending June 4

BNP Paribas, Credit Mutuel Arkea, Dexia and others issue covered bonds ... Bank of New Zealand signals readiness for maiden CB voyage ... 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.

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EUROPE (in general)

• In a downbeat article titled "Cracks Begin to Appear in Fortress Europe," Radi Khasawneh discusses how "[e]ven covered bonds, rare pillars of strength through the financial crisis, were hit by the sudden rise in volatility that all but shut down the capital markets in May."  Looking to the future, the story notes various "headwinds" hindering covered bonds' progress, including "a new wave of government-guaranteed bond issuance."  On a similar note, the European Central Bank (ECB) warned that commercial banks in Europe face "a risk of bank bond issuance being crowded out" by government financing requirements, as reported in Bloomberg and The Wall Street Journal.

• Contrasting with the item above, an upbeat Bloomberg story (June 2) stresses that "[s]ales of covered bonds are accelerating as investors seek debt backed by collateral amid growing concern about the creditworthiness of governments and banks."  The story notes that about US $7.7 billion in covered bonds had been or were being sold during the working week ending June 4 — more than double the preceding week's total.  (That total included the US $2 billion issue from Bank of Montreal.)

FINLAND

OP Mortgage Bank reportedly is planning soon to issue a mortgage-backed covered bond.

FRANCE

• BNP Paribas Home Loan Covered Bonds (June 2) priced a five-year, €1.5 billion mortgage covered bond at 42 basis points over mid-swaps.

• Credit Mutuel Arkea (June 2) priced a five-year, €1 billion covered bond at 50 basis points over mid-swaps.  Reuters quoted Maureen Schuller, an analyst at ING, as saying that Arkea "intended to do at least half a billion [euros], but ended up doing 1 billion, so there is definitely demand for these bonds."  But Schuller noted that issuers from southern Europe would have more trouble "because of the sovereign debt concerns."

• Reuters reported (June 4) that CM-CIC was selling a three-year, €500 minimum covered bond with pricing guidance at about 35 basis points over mid-swaps.

GERMANY

• Dexia Kommunalbank Deutschland (June 2) priced a four-year, €500 million covered bond at 15 basis points over mid-swaps.

• Muenchener Hypothekenbank currently plans to issue a five-year covered bond in the week of June 7.

LUXEMBOURG

Standard & Poor's Ratings Services (June 2) affirmed and removed from CreditWatch negative its 'AAA' credit ratings on the public sector covered bonds (letter de gage publiques) of Dexia LdG Banque S.A. and EUROHYPO Europaeische Hypothekenbank.

NEW ZEALAND

• There are more "reports that the major banks are rapidly gearing up to issue as much as NZ$16 billion of covered bonds," according to Banking Day (May 31). Banks reportedly have been informed by the Reserve Bank of New Zealand that covered bonds will be acceptable up to 5% of a bank's total funding requirement.

• Bloomberg reported (June 3) that Bank of New Zealand (BNZ) "is meeting investors this week before a possible sale of the nation's first covered bonds," with the paperwork needed for issuance already complete.  BNZ's initial issue may be in an amount up to NZ$400 million, and marketing may begin as soon as June 14, Bloomberg also reported (June 4).  Banking Day (June 7) cites a higher issuance estimate, at about NZ$500 million, with a pricing range 67.5 basis points to 81 basis points "over swap."

• Business Day (June 3) quoted BNZ's director of capital markets, Mike Faville, as saying that the bank's forthcoming covered bonds would offer maturities of five and seven years and will be aimed primarily at international investors — "there's a huge market in Europe."

• Moody's Investors Service (June 4) assigned a provisional long-term rating of (P)Aaa to the mortgage covered bonds proposed to be issued by BNZ under its NZ$3 billion covered bond program.

NORWAY

• Sparebanken Vest Boligkreditt AS (June 2) priced a ten-year, €500 million mortgage covered bond at 45 basis points over mid-swaps.

• Storebrand Boligkreditt AS (June 3) issued a new six-year FRN covered bond under the €2 billon EMTCN program. The first tranche of NOK 1 billion was placed through DnB NOR Markets.

• Moody's (June 4) assigned a definitive long-term rating of Aaa to the covered bonds issued by Nordea Eiendomskreditt AS established in accordance with the terms of the Norwegian Financial Institutions Act of 1988, and the regulations issued by the Ministry of Finance of the Kingdom of Norway, which came into legal effect on June 1, 2007.

SPAIN

Standard & Poor's Ratings Services (June 2) raised to 'AAA' and removed from CreditWatch developing its ratings on the mortgage covered bonds (cédulas hipotecarias) of  Caja de Ahorros y Monte de Piedad de Madrid (Caja  Madrid).

Information from rating agencies in the entries above is typically adapted from those agencies' media releases.  Rating news items should not be relied upon as a substitute for the full text of rating action announcements.