Norwegian covered bonds – a rapidly growing market Bjørn Bakke and Ketil Rakkestad and Geir Arne Dahl Charts to article in Economic Bulletin 2010

Chart 2.1 Simplified balance sheet for a residential mortgage company before a drop in house prices. Red frame indicates eligible cover pool 1). Balance sheet total = 100 before the drop in house prices Residential mortgages up to 75% LTV Substitute collateral Other assets OMFs outstanding Loans Equity 1) Eligible cover pool denotes the assets in the cover pool that qualify when calculating whether the value of the cover pool exceeds the value of the outstanding covered bonds, as is required by law.

Chart 2.2 Simplified balance sheet for a residential mortgage company after a drop in house prices. Red frame indicates eligible cover pool 1). Balance sheet total = 100 before the drop in house prices Residential mortgages up to 75% LTV Substitute collateral Other assets OMFs outstanding Loans Equity Res. mortgages above 75% LTV 1) Eligible cover pool denotes the assets in the cover pool that qualify when calculating whether the value of the cover pool exceeds the value of the outstanding covered bonds, as is required by law.

Chart 3.1 Issuance of OMFs by Norwegian mortgage companies. Billions of NOK. Q – Q Sources: Stamdata, Bloomberg and Norges Bank

Chart 3.2 Yield on an OMF and a bank bond with the same issue volume. Denominated in EUR. Three years to maturity. Per cent. 12 June 2008 – 21 July 2010 Source: Bloomberg

Chart 3.3 Maturity structure of OMFs in the government swap arrangement. Billions of NOK. Q – Q Source: Norges Bank

Chart 3.4 Maturity structure of OMFs outstanding denominated in foreign currency. Translated into billions of NOK. Issuance from Q – Q Sources: Bloomberg and Norges Bank

Chart 3.5 Maturity at time of issuance of OMFs denominated in foreign currency. Translated into billions of NOK. Issuance from Q – Q Sources: Bloomberg and Norges Bank

Chart 3.6 Risk premium for covered bonds denominated in EUR. 1) Time to maturity in brackets. Spread to swap rates. Basis points. July 2007 – June ) iBoxx Euro Covered indices Source: Markit

Chart 1 Cover pool by LTV. Selected residential mortgage companies. Per cent. 31 December 2009 Source: Norges Bank

Chart 2 Reduction in eligible cover pool after drop in house prices. Selected residential mortgage companies. Per cent. 31 December 2009 Decrease in house prices Source: Norges Bank

Chart 3 Cover pool by LTV. Selected residential mortgage companies. 31 December 2009 and scenario. Per cent Source: Norges Bank

Chart 4 Reduction in eligible cover pool after drop in house prices. Selected residential mortgage companies. 31 December 2009 and scenario. Per cent Decrease in house prices Source: Norges Bank

Chart 4.1 Risk premium for OMFs and senior debt issued by financial institutions. Spread to swap rates. Five-year maturity. Basis points. January 2007 – July 2010 Source: DnB NOR Markets (Underlying data will not be made publicly available.)