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Europe Suspends Mortgage Bond Trading Between Banks (Update1)
By Esteban Duarte and Steve Rothwell
Nov. 21 (Bloomberg) -- European banks agreed to suspend trading in the $2.8 trillion market for mortgage debt known as covered bonds to halt a slump that has closed the region's main source of financing for home lenders.
The European Covered Bond Council, an industry group that represents securities firms and borrowers, recommended banks withdraw from trades for the first time in its three-year history until Nov. 26. Banks are still obliged to provide prices to investors, according to the statement today.
Banks including Barclays Capital, HSBC Holdings Plc and UniCredit SpA took the step as investors shun bank debt on concern lenders face more mortgage-related losses. Abbey National Plc, the U.K. home lender owned by Banco Santander SA, became the third financial company to cancel an offering of covered bonds within a week today as investors demanded banks pay the highest interest premiums to sell bonds in the 12 years since Merrill Lynch & Co. began collecting the data.
``We are in a deteriorating situation,'' Patrick Amat, chairman of the Brussels-based ECBC, said in a telephone interview. ``A single sale can be like a hot potato. If repeated, this can lead to an unacceptable spread widening and you end up with an absurd situation.''
Covered bonds are securities backed by mortgages or loans to public sector institutions. Banks designed the notes to offer more protection to bondholders than asset-backed debt by making the borrower liable for repayments if the assets underlying the securities aren't sufficient. They typically have the highest credit ratings.
Spread Widening
Abbey National in London said today it had postponed its sale of covered bonds because of ``poor'' demand. AIB Mortgage Bank, a unit of Dublin-based Allied Irish Banks Plc, pulled a covered bond sale in euros yesterday and Ahorro y Titulizacion, an investment unit controlled by Spanish savings banks, decided against offering debt on Nov. 16.
``In light of the current market situation and in order to avoid undue over-acceleration in the widening of spreads,'' the committee of banks and borrowers ``recommends that inter-bank market making be suspended,'' the council said in an e-mailed press statement.
The ECBC established an ``8-to-8 committee'' of eight banks that arrange sales of covered bonds and eight representatives for issuers of the debt in September to set recommendations in deteriorating markets.
``Without market making between banks, investors will shun the sales of new covered bonds,'' said Santiago Rubio, who oversees 14 billion euros ($21 billion) of assets as head of fixed income at La Caixa's asset management arm in Madrid.
Vediamo se ho capito bene:
- prima (poco tempo fa): liquidita a tutti, su tutto, rubinetti aperti, speculazioni su m&a, private equity, un mondo perfetto
- oggi: crolla tutto perche siamo in quasi credit crunch, borse giu (nessuno ha soldi per comprare niente), book carichi di bombe a orologeria, economia reale sempre piu debole, oil alle stelle (sono gli emerging che tirano), dollaro inguardabile
Morale: a 'dda passà pure 'sta jurnata...
Europe Suspends Mortgage Bond Trading Between Banks (Update1)
By Esteban Duarte and Steve Rothwell
Nov. 21 (Bloomberg) -- European banks agreed to suspend trading in the $2.8 trillion market for mortgage debt known as covered bonds to halt a slump that has closed the region's main source of financing for home lenders.
The European Covered Bond Council, an industry group that represents securities firms and borrowers, recommended banks withdraw from trades for the first time in its three-year history until Nov. 26. Banks are still obliged to provide prices to investors, according to the statement today.
Banks including Barclays Capital, HSBC Holdings Plc and UniCredit SpA took the step as investors shun bank debt on concern lenders face more mortgage-related losses. Abbey National Plc, the U.K. home lender owned by Banco Santander SA, became the third financial company to cancel an offering of covered bonds within a week today as investors demanded banks pay the highest interest premiums to sell bonds in the 12 years since Merrill Lynch & Co. began collecting the data.
``We are in a deteriorating situation,'' Patrick Amat, chairman of the Brussels-based ECBC, said in a telephone interview. ``A single sale can be like a hot potato. If repeated, this can lead to an unacceptable spread widening and you end up with an absurd situation.''
Covered bonds are securities backed by mortgages or loans to public sector institutions. Banks designed the notes to offer more protection to bondholders than asset-backed debt by making the borrower liable for repayments if the assets underlying the securities aren't sufficient. They typically have the highest credit ratings.
Spread Widening
Abbey National in London said today it had postponed its sale of covered bonds because of ``poor'' demand. AIB Mortgage Bank, a unit of Dublin-based Allied Irish Banks Plc, pulled a covered bond sale in euros yesterday and Ahorro y Titulizacion, an investment unit controlled by Spanish savings banks, decided against offering debt on Nov. 16.
``In light of the current market situation and in order to avoid undue over-acceleration in the widening of spreads,'' the committee of banks and borrowers ``recommends that inter-bank market making be suspended,'' the council said in an e-mailed press statement.
The ECBC established an ``8-to-8 committee'' of eight banks that arrange sales of covered bonds and eight representatives for issuers of the debt in September to set recommendations in deteriorating markets.
``Without market making between banks, investors will shun the sales of new covered bonds,'' said Santiago Rubio, who oversees 14 billion euros ($21 billion) of assets as head of fixed income at La Caixa's asset management arm in Madrid.
Vediamo se ho capito bene:
- prima (poco tempo fa): liquidita a tutti, su tutto, rubinetti aperti, speculazioni su m&a, private equity, un mondo perfetto
- oggi: crolla tutto perche siamo in quasi credit crunch, borse giu (nessuno ha soldi per comprare niente), book carichi di bombe a orologeria, economia reale sempre piu debole, oil alle stelle (sono gli emerging che tirano), dollaro inguardabile
Morale: a 'dda passà pure 'sta jurnata...
