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Capital Markets

Established markets are still going strong

Although new covered bond jurisdictions such as the UK have monopolized recent headlines, established jurisdictions such as Germany, Spain, and France still account for the bulk of issuance. According to figures from CDC ICM, in the first quarter of 2003 total issuance was €35.6 billion. Of that, obligations foncières accounted for 15%; cédulas hipotecarias for 31%; and jumbo Pfandbriefe for 37%. Obligations foncières, with their true bankruptcy separation, are widely perceived to be among the safest covered bonds. Investors are also fond of them because of the relatively small number of French issuers - Crédit Immobilier de France (CIF), Compagnie de Financement Foncière (CFF), and Dexia Municipal Agency (Dexma).

CIF only issues covered bonds backed by residential mortgages. Dexma is purely a public credit institution. CFF mixes mortgage and public-sector lending. So investors that like solid residential mortgages can plump for CIF, those that like the guarantees associated with public credit go with Dexma, and those that want to mix and match can do so with CFF.

Although France is often characterized as a domestic market, issuers report consistent investor interest from around Europe, Asia, and the Middle East. "When we issue, we target investors internationally," says Jenny Cabrol of CIF's investor relations team.

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