Covered Bonds

The European Covered Bond Council this morning issued a statement saying that it expects market-making to continue, albeit acknowledging the wider bid/offer spreads that may be necessary.

The European Covered Bond Council stood its ground on market-making this (Tuesday) morning, insisting that dealers continue to quote prices to each other, albeit at wider bid/offer spreads.

UK covered bonds were hammered in trading this (Tuesday) morning, even if market-making was said to be more consistent than on Monday, when many dealers were not quoting prices.

“Don’t take a hit-and-run approach to covered bonds.” That was the appeal from one leading covered bond buyer in Germany to issuers and lead managers today (Monday).

There was growing speculation this (Monday) morning that the European Covered Bond Council was considering in some way relaxing the market-making commitments that have exacerbated volatility in the covered bond markets.

Nationwide Building Society’s Eu1bn five year covered bond came in for criticism after launch. Here, Justin Fox, head of treasury markets at Nationwide, gives his response.

While diversification by issuers into alternative currencies is one way of addressing the problem of bottlenecks in the market for euro-denominated jumbo covered bonds, another is for issuers to explore alternative sub-segments of the product, such as the market for Namenspfandbriefe. Philip Moore reports.

HBOS’s decision to be the first to test the market early this week looked even more astute today as the market continued to reprice.

With the key Norwegian piece slotting into place next to Sweden and Finland, all that is needed is Denmark to complete the Nordic covered bond jigsaw. Bankers say that the region may also emerge as a test-bed for the next generation of products in terms of geographical diversification, such as multi-jurisdictional deals with mortgages in the cover pool drawn from a number of countries. Philip Moore reports.