Hopes fade for ABS supply uptick as covereds appeal
The sluggish start to the year in the ABS primary market is set to continue into February, with only a trickle of mandates on the horizon. UK issuers moving away from the cheap liquidity of the Funding for Lending Scheme may prefer to use the covered bond market over RMBS, said syndicate bankers.
Secondary market spreads contracted to their tightest levels since the 2008 financial crisis and have not widened during recent volatility, particularly in core assets. But the spread differential between RMBS or ABS and covered bonds is still large enough to sway issuers towards covered bonds, according to bankers.
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