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’Imagine no recoveries in bank senior debt
Seems kinda churlish to throw this out amidst the biggest bank bond rally since 2009. But…
We believe investors should assume a low (possibly 0%) recovery rate on most senior unsecured bank bonds
In practice,
A covered trend?
In terms of issuance, covered bonds seem to have had a strong start to the year, but is the market warping all of a sudden?
We hear there was a rush of issues from French banks just last week, but suddenly this week they are missing.
Running for covereds in 2012
And the winner of European credit markets so far in 2012 is…
…covered bonds!
CRH French OF, €2bn June 2022@ ms+ 160bp
ING, Dutch covered bond, €1.75bn Jan 2022 @ ms +110bp
UBS, Swiss covered bond,
When you depend on collateralised collateral
We know from the ICMA European Repo survey that European repo market participants have been using more covered bonds for collateral in 2011 than ever before.
The thinking, we imagine, is that in a world where there isn’t enough ‘risk free’ collateral to support outstanding funding needs,
No change at the ECB (inflation hawks win)
PRESS RELEASE 6 October 2011 - Monetary policy decisions.
At today’s meeting, which was held in Berlin, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.50%,
The ECB and covered bonds – the next chapter?
The ECB is considering having another go at supporting the $1.58tr eurozone covered bond market.
Now, the last time the ECB entered this market, things didn’t go exactly to plan, as the graph below from Barclays Capital demonstrates.
Recession and rate cuts: RBS call ‘em in Europe
Here it is in full, from Jacques Cailloux and team at RBS:
Despite some early signs of a slightly firmer Q3 GDP (our GDP Tracker is at 0.2% q/q vs 0.1% q/q last month) on account of strong German industrial production (boosted by favourable working day effects),
A peek at private placements
We know that private placements have become a popular method of European bank funding recently.
Though smaller, the deals do allow issuers access to cheaper, more flexible funding — or even money that might not otherwise have been available to them given recent eurozone sentiment.
Danish covered bonds at dawn
A break in the clouds, for Denmark’s stormy covered bond market:
(Bloomberg) Denmark’s covered bonds are likely to be snapped up by U.S. buyers even after Moody’s Investors Service downgraded the securities,
Greek covered bonds to the rescue?
A counter-intuitive headline, to be sure, given that Greece has just one publicly outstanding covered bond left (but over €12bn of ‘retained’ covered bonds used as fodder for central bank liquidity).
Tap tap tap – covered bonds on a drip
Hidden in the €144.2bn of euro-denominated covered bonds issued so far this year is a number.
€18.2bn.
About 13 per cent of total covered bond supply this year came not from new issuance, but from increases in existing benchmark covered bonds.
The lesser-spotted variegated burdensharing for senior bondholders
So Ireland has been busy threatening to throw senior bank debt investors under a bus. Again.
Earlier this week, Irish finance minister Michael Noonan announced plans to force “substantial” burdensharing for investors in the senior debt of Anglo Irish Bank and Irish Nationwide .
Santander’s €1bn flop – the covered bond that barked
Woof.
The Wall Street Journal has more details of the €1bn covered bond issued somewhat disastrously by Spanish bank Santander last week. Why disastrous? Deal managers were only able to sell about half of the bond,
European securitisation – now mostly retained
A milestone, of sorts, in the European structured finance market.
At the end of the first-quarter of 2011, retained securitised debt made up a bigger proportion — at 51.7 per cent — of total outstanding debt (€2,076bn) than debt placed with investors,
Morgan Stanley wants you to pay more attention to seniors
Seniors have had a hard time of it lately.
They’ve been usurped by a trendier generation, buffeted by changing times. Now Morgan Stanley analysts want you to consider this frail group. They want you to …
Surprise – Moody’s accidentally rates a bond too low
Is there a Type III ratings error category? Where rating agencies completely misidentify what kind of bond they’re rating? Awkward:
(H/T Sam Jones of Moody’s rating error fame)
Covering RBS funding, quietly
In an otherwise static RBS funding base for the first three months of the year…
… There was really only one type of security taking up a bigger share of financing the world’s biggest balance sheet than at the beginning of 2011 — covered bonds:
Spanish covered bond disclosure. It’s the (unheeded) law
Moody’s is on the warpath against sketchy Spanish structured finance data again.
But this time the agency’s sites are firmly set on the mother of all SF — covered bonds.
Remember, covered bonds are meant to be ultra-safe — almost to the same degree as sovereigns bonds — and Spain has spent many of the previous months trying to soothe investors with new disclosure rules.
An MEP out to risk-weight the eurozone
Here’s a tip for all financial journalists and market participants.
To spot the next source of financial instability — simply identify the assets currently considered ‘safest.’ At the moment we’d argue those are covered bonds,
Covered bonds as the new sovereigns
Non-German readers won’t be able to read this article by a representative of the German finance ministry (except, perhaps, through the magic of Google Translate).
But we can summarise it for you.
The author,
US covered bond conundrums
Our colleague Jennifer Hughes cites the worries of fund managers over the underlying collateral that backs covered bonds in Europe, which reminds us that we’ve been meaning to write something about another recent proposal meant to jumpstart a covered bond market here in the US.
The covered bond premium is over, Goldman says
Remember this?
Late last year FT Alphaville noted some weirdness going on between senior unsecured bonds — which lack specific collateral — and covered bonds which come with their own ring-fenced assets.
Irish mortgages everywhere – but not a one to collateralise with?
So. This is an interesting chart:
Those are covered bond details for AIB Mortgage Bank, part of troubled Irish bank, AIB. Focus for a second on the two overcollateralisation figures — which are basically the degree to which the bank’s covered bonds are overstuffed with assets.
Pointing out Japan’s (Pfandbrief) effects
Pfandbrief, ultra-boring — yet they never cease to surprise in a crisis.
Did you know, for instance, that the bond structures beloved by German banks have some exposure to Japan? Granted, it’s not much — but we think it’s surprising.
Irish secret liquidity, forever
Irish bank borrowings from Europe’s central bank in February — down €10bn, to €116bn (after much collateral swap shenanigans).
Irish bank borrowings from their own central bank, with collateral unacceptable at the ECB — up €20bn,