UBS Covered Bonds Ushered Out 2008 on Positive Note

It’s not news that covered bonds are currently in the doldrums—even in their European strongholds—or that experts there predict relatively few new “jumbo” covered bonds in 2009.  So it was encouraging to see UBS end the year with a Swiss issuance in the neighborhood of US $1.83 billion (two million Swiss francs). 

UBS’ move—just before Christmas—came only weeks after media reports that the company was planning to get back into covered bonds.  The issuance is backed by Swiss mortgages and subscribed by Swiss retail banks, according to Reuters. 

Last year’s downturn for covered bonds in the wake of the liquidity crisis should not be allowed to obscure the many “firsts” for this financing vehicle outside their traditional territory.  Here is a selection of illustrative news headlines or lead sentences (most dating from before Covered Bond InvestorTM was launched):

“Uruguay completes draft covered bond law”

“Canada’s credit unions are exploring ways of emulating Spain’s savings banks by issuing pooled covered bonds….”

“Covered Bonds set sail in Greece”

“Ukraine Enters the Covered Bond Market”

“S. Korea to allow local banks to sell covered bonds”

“Taiwan targets covered bonds….”

“Shinsei to raise $280 [million] in [Japan’s] first covered bond”

“Westpac [New Zealand] could take covered bonds down under”

“Mexico Mortgage Industry Mulls Creating Covered Bond
Market”

“The National Bank of Azerbaijan and IFC keep working on Draft on Housing
Finance Covered Bonds”

“OTP Mortgage Bank establishes first ECB eligible Hungarian covered bond
programme”

In the U.S., Treasury Secretary Paulson’s push supporting covered bonds for home mortgages was soon overshadowed by other developments, including the government’s de facto nationalization of Fannie Mae and Freddie Mac.  But the brief burst of publicity has given the financing vehicle a higher profile here than ever before.  At least, it’s something to build on—perhaps in ways that have nothing to do with residential real estate.