Tight repo leads to fears of failed covered bond trades
The secondary market in short dated covered bonds is in danger of breaking, and though it is not there yet, there are concerns over ‘forced delivery squeezes’ in the repo market which may lead to failed trades.
It has always been the intention of the European Central Bank to improve liquidity, but bankers say it could do better. As it stands, covered bonds could risk becoming almost like a private placement market.
Few covered bond traders have any inventory on their books and they are
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