The Bank of New Zealand (BNZ) has successfully completed a €500 million (NZ$801 million) issue of covered bonds, secured by New Zealand residential mortgages, to European institutional investors.
The bonds, due to mature in May 2015, were priced at 113 basis points over the euro midswap rate. This doesn't, however, include the cost of converting the €500 million back to New Zealand dollars.
At 113 basis points over swap, the price is better for BNZ than other recent covered bond issues by Australian banks, although the three-year term is shorter than the usual five to 10 years. The ANZ Banking Group, for example, paid 130 basis points over swap for a €1 billion, 10 and a half-year covered bond issue this month. Its subsidiary, ANZ New Zealand, paid 95 basis points over swap last October when it sold €500 million worth of five-year covered bonds. Back in November 2010 BNZ paid 62 basis points over swap in a seven-year €1 billion covered bond issue.
The euro denominated issue comes after BNZ Treasurer Tim Main told interest.co.nz earlier in January that the bank hoped to take advantage of a window of opportunity in "a market that has become a little less frozen" to raise at least €500 million to help pre-fund projected funding requirements for the coming year.
Also this month BNZ sold NZ$225 million worth of six-year AAA rated covered bonds to a local institutional investor or investors through a private placement.
Covered bonds, secured by a "cover pool" of residential mortgages written by the bank issuer, typically attract these highest possible credit ratings because investors have dual recourse to the bank and mortgage pool collateral should the issuer default. See more on covered bonds here.
5 Comments
So BNZ account holders, there is now someone in front of you in the queue, if BNZ runs into trouble. Couldn't possibly happen could it? Oh I forgot, it did already, a few years back.
Never mind, Mr Smiley Wavey will ensure everyone is bailed out. Same old shit, different day. I am starting to think the Gold Bugs around here might be on to something.
Gold bugs are basically the same fettish as Tea party supporters. Most of them are ignorant of any kind of history. Their entire concept of theory of anything devolves into pigeon holeing any other side into straw man concepts which are duely 'debated' and the cognisent leadership of the movement is intent on vilifying and destroying all democracy, presumably because it is potentially able to actually act against their interests.
http://www.rbnz.govt.nz/finstab/banking/4368385.html
Your in luck, it looks like its not going to be a tax payer bailout next time a bank goes under.
How can the OBR facilitate an insolvent Bank to open for buisness the next day, without the Govt providing funds? It can't, either the Bank has the funds, or it doesn't. That's what is called a Bailout.
Also the OBR says:
"In addition, a portion of depositors’ and other unsecured creditors’ funds will be frozen to bear any remaining losses"
No mention of Covered Bond Holders that i could see, they would be secured creditors I assume. And the pool of funds available to deposit holders, does not include secured creditors.
I don't think the OBR policy says anything about all the money being there, just that the bank is open and there is some access to some funds.
Yes, that probably means some deposit holders or securities holders will get a 'haircut'.
Just pointing out that smiley wavey did do something. I guess that doesn't live up to expectations which apparantly require that he creates a utopia where nobody ever goes bust or loses money or get bailed out.
Two points...covered bonds give banks a rush of drugs to the head and place savers holding deposits at greater risk of total loss.
Stay away from the covered bond banks....your deposits are less safe than they have ever been and the govt will not be there to bail you out.
This madness.... on top of the piigs EU euro crisis, the UK recession new normal, the US liabilities printing farce, the China property implosion, on top of the aus property crash....only serves to expose the NZ economy as a rotten state dependent on other peoples money....an economy incapable of saving....an economy suffering from gross mismanagement for decades.
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