DNB Offers $2 Billion Deal As Covered Bond Market Shatters Record
March 22 2011 - 1:09PM
Dow Jones News
First came the Canadians. Now, issuers from France, Sweden and
Norway are selling covered bonds in the U.S., making 2011 the
busiest year on record for these mortgage-backed securities before
the first quarter is out.
With a week to go in March, foreign banks have sold close to $11
billion of covered bonds--securities backed by a specific pool of
mortgages--in the U.S., according to data provider Dealogic. That
is more than twice as many as they sold here in all of 2007, the
peak of the housing boom, and more than any year since Dealogic
began counting in 1995.
No domestic issuer has stepped forward to tap this market so far
because--unlike U.S.-style mortgage-backed securities--banks
issuing covered bonds must hold the mortgages on their books and
meet additional capital requirements. Unlike residential
mortgage-backed securities that failed after the housing bubble
burst, covered bonds let investors recoup money from banks that
issue the bonds as well as from mortgages in the bonds
themselves.
Covered bonds are popular in Europe but not in the U.S., partly
because banks are not eager to shoulder the additional risk
inherent in such bonds but also because investors are wary of what
would happen to the assets if an issuing bank failed and was taken
over by the Federal Deposit Insurance Corp.
Foreign issues come with guarantees from their respective
governments.
DNB Nor Boligkreditt AS (DNBNOR.OS) of Norway announced a
five-year $2 billion covered bond backed by the Norwegian
government Tuesday. That follows a $2 billion covered bond from
Swedbank Mortgage AB of Sweden on Monday, and a $1 billion covered
bond from Caisse Centrale DesJardins du Quebec last week.
As many as $60 billion of covered bonds may be sold in the U.S.
this year, according to an estimate from Barclays Capital. That
would be about twice as many as were sold here in 2010, according
to data provider Dealogic.
In 2007, before the credit crisis, foreign banks sold a $10.7
billion of U.S. dollar-denominated covered bonds. Bank of America
Corp. (BAC) was the last U.S. bank to issue a covered bond, a $2
billion dollar-denominated deal in July 2007.
Bank of Montreal (BMO, BMO.T) issued the first covered bond of
2011, a $1.5 billion, five-year deal sold via the private Rule 144a
market.
National Bank of Canada (NTIOF, NA.T) followed with a $1
billion, three-year covered bond. Canadian Imperial Bank of
Commerce (CM, CM.T) also sold a $2 billion covered bond in January,
creating a trifecta of Canadian sellers of U.S. dollar-denominated
bonds early in the year.
-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227;
anusha.shrivastava@dowjones.com
Canadian Imperial Bank o... (NYSE:CM)
Historical Stock Chart
From Aug 2024 to Sep 2024
Canadian Imperial Bank o... (NYSE:CM)
Historical Stock Chart
From Sep 2023 to Sep 2024