Weekly Global Roundup - September 4

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.

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AUSTRALIA

• Moody's Investors Service noted Thursday (Sept.3) that its approach to covered bonds—as currently proposed for the Australian market—emphasizes "the strengths of these secured debt instruments relative to the senior unsecured debt obligations of a given issuer."  Moody's released a report on the ASF proposed legislative framework for covered bonds in Australia. The report looks into the markets for covered bonds overseas, a legislative framework for the market in Australia proposed by the Australian Securitisation Forum, and the details of Moody's rating approach and considerations.

• Glenn Baker of ING told Sky News in an interview published Friday (Sept. 4) that if Australia adopted covered bonds, lower-rated banks establish AAA-rated covered bond programs that could "make them more competitive with the big four banks" by enabling them to borrow at lower rates.

GERMANY

• Eurohypo Wednesday (Sept. 2) issued a public sector €1 billion Pfandbrief (German legislative covered bond) with a five-year maturity.  Initial guidance was set at 12 to 14 basis points over swaps, later narrowing to 12 basis points over mid-swaps.

• Low yields on German government bonds and on Pfandbriefe (legislative covered bonds) spurred higher demand for corporate bonds in August, according to a report Tuesday (Sept. 1).

ITALY

Fitch Ratings last Friday (Aug. 28) issued a correction to a previous announcement, "Fitch Affirms Ratings of Covered Bonds Issued Under 40 Programmes" (Aug. 5) to correct a detail on Unicredit S.p.A.  The corrected version specifies that "[t]he supporting Asset Percentage (AP) assigned to Unicredit S.p.A.'s mortgage covered bond rating in the table at the end of this comment is 82.0%, and not 78.0% as previously stated."

SPAIN

Banco Español de Crédito (Banesto) Wednesday (Sept. 2) priced a 3½ year, €1.25 billion Cédula Hipotecaria (Spanish legislative mortgage covered bond).  Initial guidance was set at 50 basis points over mid-swaps, later narrowing to 45 basis points over mid-swaps.  Fitch Ratings Thursday (Sept. 3) assigned an expected 'AAA' rating and simultaneously affirmed all of Banesto's other rated outstanding Cédulas Hipotecarias at 'AAA.

SWITZERLAND

UBS AG plans to start issuing covered bonds, it was reported Wednesday (Sept. 2).  According to the Wall Street Journal, this will be the first time a Swiss bank has become a covered bond issuer in its own right.  Previously, the Swiss government helped UBS' liquidity by arranging deals in late 2008 and early this year whereby UBS used Swiss mortgages as collateral for a loan from a Swiss covered bond institution, which in turn issued covered bonds that were purchased by Swiss retail banks.