Few markets managed to come out of the crisis in one piece. But for covered bonds, the past few years have been different, with the asset class coming out bigger and more enhanced. Once considered a niche – even, some might argue, boring – product, the decline of other parts of the bond market have suddenly cast it into the limelight, bringing a variety of new participants into its orbit. Nature abhors a vacuum. And when the illusion that sovereign debt – any sovereign debt – is risk free was shattered, investors were left with a very...Read more
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On the first anniversary of the conclusion of the ECB purchase programme, the covered bond market is now standing on its owntwofeet and is flourishing. Spreads have tightened, issue sizes have increased and the market is enjoying record supply. But howmuchcredit goes to the programme itself, asks Aimee Donnellan.
The series of financial crises that have occurred in recent years have been defining for the covered bonds market. And none more so than the sovereign debt crisis in Europe, which left a vacuum this low-risk asset was left to fill. This is illustrated perfectly by the events in Spain, both a major covered bond market, and a sovereign issuer that has seen turbulent times. Lisa Cooper reports.
The covered bond market experienced a record first quarter this year. Investors clambered over each other to buy up as much of the product as possible, leaving senior unsecured debt out in the cold. But with a limited amount of collateral available, bankers believe a balance between the two markets is likely to develop. Aimee Donnellan reports.
RMBS-backed deals show investor willingness to get comfortable with slightly more complex structures – but only for internally-sourced assets. They are unlikely to open any floodgates to significant further issuance, and the number of issuers active in the market is set to remain small. Denise Bedell reports.
The resurgent covered bond market, with a few exceptions, has belonged to established names with only a handful of new issuers. This is set to change as new legislation arrives giving investors greater peace of mind about the quality of cover pools. David Rothnie reports.
To view the digital version of this report, please click here. The new faces in the market have not only been on the issuer side. Covered bonds have attracted a range of new investors, too, with rates investors, for example, flocking to covered bonds as they shun peripheral sovereign debt. There is also evidence that central banks are investing more in covered bonds in the three to five-year part of the curve. “Credit investors are coming to the asset class because they are concerned about bail-in discussions that could see them bear losses...
Issuing a record US$30bn in covered bonds, the US market became the talk of the covered bond town in 2010. But while Canadian and European banks continue to dominate issuance activity, the fate of covered bonds for US domestic issuers still hangs in the balance. Rachelle Horn reports.
Australia is leading the way in preparing a legislative base to support the emergence of a covered bonds market. With deals already coming to market in Australia and New Zealand the demand is clearly there, and the changes could pave the way for other Asian countries to follow suit. Manju Dalal reports.
The Scandinavian covered bond market is in rude health, with transactions comfortably oversubscribed, some even upsized, to take into account the continued wave of interest in the region. And with issuance volumes forecast to remain relatively unchanged over last year’s supply, foreign investors are champing at the bit, eager to buy up primary market bonds upon launch. Hardeep Dhillon reports.
Proposed S&P counterparty criteria place too much emphasis on concentration and diversification at the cost of flexibility, and may do little to help risk diverisifcation, according to some market participants. Whether it will go forward as proposed is still unclear, but should it do so, it could have more effect of the rating agency than on the covered bond market. Denise Bedell reports.