Covered Bonds

The bulging covered bond pipeline of debuts, postponed transactions and regular issuance is not expected to reopen until at least early next week, with market participants awaiting next Monday’s restart of market-making and the wholesale return of investors, as well as clearer clues to sentiment in the wider financial markets in the coming days.

The UK government’s extension of guarantees relating to Northern Rock obligations on 18 December was seen as good news for covered bondholders. Moody’s downgraded Northern Rock’s bank financial strength rating from D+ to E+, but said that the extension “further underpins the Aa3 bank deposit and senior debt ratings”.