Parsing Bloomberg On Covered Bonds

Bloomberg's coverage of just about everything economic is generally tainted with peaches to pears comparisons fortified with out of context quotes. But these journalistic conceits are dwarfed by the extravagance of their headline writers. Take yesterday's Ambrosian 'Covered Bond Market Seizes on Plan for ECB Purchases'...

...and the random, and randomly organized, smattering of facts, few of which actually confirming the title, that follow:

1). The bid/offer spread, a measure of the cost of trading, for some five-year French covered bonds has widened to 30 basis points from 20;

2). Banco Santander SA issued 1.5 billion euros of covered bonds on May 11 in the first sale of the debt by a Spanish bank in almost a year. The bid/offer spread on so-called cedulas issued by groups of banks has increased to 50 basis points from 30 basis points before the central bank's announcement;

3). The ECB's plan has narrowed the yield spread over benchmark rates that investors demand to buy French covered bonds, known as obligations foncieres, by about 20 basis points to 120 basis points more than the benchmark mid-swap rate.

And, in conclusion:

4). 'It's clearly a very strong positive for the market; the problem is we don't know how positive', said Richard Kemmish, the London-based head of covered bond origination at Credit Suisse Group AG.

To translate, for the lost and confused:

1). The bid/offer spread in the secondary market for some, but not all, French covered bonds has widened by 10 bps;

2). Santander issued 1.5 billion in cédulas. The bid/offer spread in the secondary market on some Spanish cédulas has increased by 20 bps since the BCE announcement. The reader could be forgiven for not understanding that these two items are not related. The issue was sold 4 days after the BCE announcement;

3). Yield spreads in the primary market, which are the real issue for cash-strapped issuers, for French covered bonds narrowed by 20 bps following Trichet's declaration. This is a good thing;

And, in conclusion:

4). 'It's clearly a very strong positive for the market; the problem is we don't know how positive', said Richard Kemmish, the London-based head of covered bond origination at Credit Suisse Group AG.

Thankfully, Bloomberg was considerate enough to provide us, one day later, with the definitive definition of 'seizure':

BNP, La Caixa Lead Biggest Covered-Bond Sales in Almost a Year.

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