Since the depths of the crisis, as some semblance of normality has returned to financial markets, covered bonds have regained their status as the poster child of a low-risk investment strategy. And its appeal has even broadened in recent years: some hedge funds looked at the market for the first time during the crisis, and, while few are still active buyers, a greater number of pension funds and insurance companies invest than ever before. Countries with established covered bonds markets – Germany, France, the Nordics – have seen them...Read more
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The European Central Bank’s covered bond buying programme draws to a close at the end of June. With a massive Eurozone bailout underway, support remains for the asset class, which is predicted to thrive. The programme has probably been a success by most measures, yet come in for criticism from various quarters. David Rothnie reports.
Covered bonds have been around for many years but the investor base has traditionally been relatively exclusive. Recently this has changed, as investors outside Germany, and from an expanding array of institutions, have caught on to the appeal of these low-risk securities. But will it be enough to offset the withdrawal of the ECB’s buying programme? Savita Iyer reports.
The relationship between the covered bond and senior unsecured markets has evolved as the financial crisis has unfolded. Currently, the funding cost advantage of covered bonds over senior unsecured is by and large in favour of covered bonds, but that has not always been the case. Hardeep Dhillon reports.
The German Pfandbrief market, long the largest and most established of Europe’s covered bond markets, has consolidated its position through the sovereign crisis, when peripheral markets have closed down. But challenges remain, and it remains to be seen what form the post-crisis market will take, especially once regulatory changes have been finalised. David Rothnie reports.
Regulatory changes governing French covered bonds are expected to be introduced over the next few months that will pull the market in line with other major issuing countries in Europe. The specific legal framework will provide better protection for both investors and issuers. Han-nee Tay reports.
The push towards establishing a covered bond market in the US has gathered pace. Despite the absence of covered bond legislation in the financial reform bills that came out of the House and the Senate this year, the securities have a lot of devotees in the US. Meanwhile, Yankee issuers have picked up the slack until domestic issuers get in gear. Timothy Sifert reports.
Heightened sovereign risk has played a major role in driving spread movements within the covered bond sector. Contagion fears from the Greek crisis have rocked confidence and increased volatility in the European peripheral government bond markets of Portugal, Italy, Ireland and Spain. Hardeep Dhillon reports.
The Spanish covered bond market, once one of the most vibrant in Europe, is closed for the season, thanks to the Spanish sovereign rating downgrades and concerns over the strength of Spanish savings banks. When it reopens, the market may look quite different. Denise Bedell reports.
If anywhere in Europe has a chance of bringing transactions to the market and successfully selling them in this period of uncertainty, it’s the Nordic region. Always one of the most reliable covered bond markets, it looks especially well placed, having come through the European sovereign debt crisis relatively unscathed. Savita Iyer reports.