Commerzbank published its first half review of European covered bond activity, reporting that so far issuance of German Pfandbriefe is declining while Spanish Cedulas, Irish Asset Covered Securities, U.K. structured covered bonds and Austrian Covered bonds are growing, Commerzbank analysts said that the focus remained on Southern Europe and that new issuance from Spain, Italy and potentially Portugal will dominate the market.


Italy is close to completing its covered bond legislation and Italian officials expect the first mortgage-backed covered bond for the second half of 2005. According to Commerzbank, Italian bank San Paolo IMI has announced a covered bond issuance program with a debut issue that will total at least €500 million ($608 million). In Spain, Spanish Cedulas volume has surpassed German Pfandbriefe issuance so far this year and analysts said that despite an expected slowdown in issuance during the second half of the year, Spain was likely to remain top issuer for the year as a whole.


There are also hopes that Portugal might still see its first covered bond issue this year, as reports emerged that a new covered bonds law is in the works and is awaiting approval by the Portuguese Parliament. According to Caixa Geral Depositos, the new law expected to be adopted shortly, will eradicate the withholding tax on non-residents suspended. Commerzbank said it expected Caixa would launch the debut issue.


Analysts also said that the first jumbo covered bonds are on the way from the Netherlands and Scandinavia. The first of these has been slated for a September debut. ABN AMRO will issue a triple-A rated jumbo structured covered bond off a €25 billion issuance program with the debut issue expected to be in the region of  €1.5 billion to €2 billion. Analysts said that the deal would be a structured covered bond without the support of national legislation.

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