Portugal

Established covered bond investors are often sceptical about conditional pass through deals. The structure allows the maturity of their investments to be extended, perhaps by decades. But they could be safer than long dated bullet deals.

The European Central Bank’s extra haircuts for covered bond repo, which took effect on Monday, could spur issuers to consider using conditional pass through (CPT) structures. The higher ratings issuers can achieve using CPT structures mean lower haircuts.

The Bank of Portugal could compensate Novo Banco bondholders who were written down at the end of last year, as the controversial bail-in comes under further scrutiny.

As a decision on whether Novo Banco has triggered a government intervention credit event heads to external review after weeks of ISDA Determinations Committee wrangling, some market participants are worried that a 'no' will reduce the value of financial credit default swaps, while others warn that a European-only result could open a rift with US contracts.

It has been a big week for the International Swaps and Derivatives Association. The organisation moved to overhaul its credit determinations committee rules and broaden its board representation at the same time as undertaking a widely watched first credit event auction of the year and heading into new territory with a Novo Banco CDS external review.

The Iberian Peninsula was host to a duo of barnstorming sovereign benchmarks this week, but there was no consensus among bankers over whether they signified an appetite for sovereigns at the lower end of the European credit quality spectrum.

Portugal equalled its largest ever benchmark size with a visit to the 10 year part of the curve on Thursday, taking the week’s overall sovereign euro issuance to a record high.

Portugal equalled its largest ever benchmark size with a visit to the 10 year part of the curve on Thursday, taking the week’s overall sovereign euro issuance to a record high.

ISDA, entering new territory, has asked members to help it put together an external review panel to resolve its deadlock over whether or not Novo Banco has triggered a credit event.

Portugal is limbering up for its first benchmark of the year in a week heavy with eurozone periphery sovereign issuance, including an auction where Italy’s three year yield nearly dipped below zero.

ISDA’s EMEA Determinations Committee has referred Novo Banco credit default swaps to an external review, after failing to achieve a “supermajority” with its binding vote on whether the Portuguese bank has triggered a government intervention credit event.

The International Swaps and Derivatives Association (ISDA) pledged to tighten up the standards that govern its Credit Derivatives Determinations Committee, a welcome move at a time when the committee’s role is evolving and it is assuming greater importance as a quasi-legal authority.