Industry giant Washington Mutual, Seattle, is planning to tap European capital markets by launching the first covered bond program collateralized by U.S. residential mortgage collateral -- marking a "significant departure" from WaMu's traditional funding sources such as the Federal Home Loan Bank system, according to Standard & Poor's.WaMu said it expects the pricing of the bonds in its 20 billion euro (about $25.6 million) maximum program to be competitive with other funding sources and to "mirror" the FHLBank system's advances, according to S&P credit analyst Todd Niemy. Given this and other advantages, the move may open the door for other U.S. banks to follow suit in the use of the bonds, which have existed in Europe for centuries but seen recent innovations (such as this one) that have renewed interest in them, Mr. Niemy said. Barclays Capital arranged the program and is slated to be a lead manager, along with ABN Amro and Deutsche Bank, S&P said. WaMu can be found online at http://www.wamu.com, and S&P can be found at http://www.standardandpoors.com.

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