La Caisse Centrale Desjardins du Quebec plans to issue the first covered bonds under a program that it registered with the Canadian government in January, according to a presale report published by Moody's Investors Service.  

The presale report indicates that the offering, which would also be the first Canadian covered bond to be issued in 2014, has yet to be sized. Moody's has assigned preliminary a ‘Aaa’ rating to the initial Series CBL1 bonds. Caisse Centrale may issue up to €5 billion under its program.

The covered bonds have recourse to both Caisse Centralae, which Moody's rates Aa2/P-1, and a revolving pool of about $1.6 billion Canadian of prime conventional Canadian mortgages. All mortgages in the cover pool must meet eligibility criteria that requires them to be in a first lien position, have 20% minimum equity and be in a non-delinquent status when placed in the cover pool, among other restrictions, according to Moody's.

Canada introduced a legal framework for covered bonds in 2012, forcing issuers to scrap their existing programs. Since then, only the Canadian Imperial Bank of Commerce (CIBC), the National Bank of Canada and the Royal Bank of Canada (RBC) have both registered covered bond programs with the Canada Mortgage and Housing Corp (CMHC ) and issued covered bonds. Bank of Nova Scotia (July 2013)  has registered a program with the CMHC but has yet to bring a deal to market. Two more firms that were regular issuers in the past, Toronto-Dominion Bank and Bank of Montreal, have yet to register new covered bond programs.

Following the registration of their new programs, RBC, CIBC and NBC came to market issuing a combined $13.2 billion, through eight separate series denominated in U.S. dollars, Australian dollars and euros, in 2013.

Total issuance during 2013 was substantially below the $17.0 billion issued in 2012 and the $25.7 billion issued in 2011, according to a DBRS report.  Analysts said in the report that is expects the remaining issuers to come to market in the spring of 2014.


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