Covered Bonds

Market participants do not expect banks to repay their targeted longer-term refinancing operations (TLTROs) borrowings early when a window opens next month, though the primary market would retain plenty of capacity to swallow up any increased issuance.

S&P has predicted that covered bond ratings will remain steady as European authorities phase out pandemic support, though some cover pools are more at risk than others.

Muenchener Hyp (MuHyp) was the sole representative in the Swiss franc market this week, as it tapped demand for long end paper.

The European Central Bank made a bold change to its monetary policy on Thursday, effectively pushing any prospect of interest rate hikes into the distant future, making them unlikely before the middle of the decade. Frank Jackman, Lewis McLellan and Burhan Khadbai report.

Communication is the only real policy tool where the European Central Bank still has wiggle room.

The ratio of encumbered assets over total assets increased by its largest ever margin last year, according to a report this week from the European Banking Authority, which attributed the increase to lenders making “extensive use” of central bank facilities during the pandemic.

Sustainable covered bond issuance could hit a record high in 2021, and with the ECB considering introducing mandatory climate disclosures for its collateral and purchase programmes, analysts expect the sector to find growing market support over the next few years.

Across the markets covered by the PMM, issuance volume has remained roughly consistent in each of the last four weeks, averaging just over $35bn, with last week's total reaching $41bn. However, last week the number of transactions plummeted from an average of 29 each week in the three weeks before to just 13.

Commonwealth Bank of Australia (CBA) has returned to the long end of the covered bond market sell its first private placements in the format since 2019.

The spread outlook for covered bonds is likely to remain positive over the summer period, said traders, even though yields are negative. The main risks to that prognosis are likely to emanate from the possible course of inflation.

Covered bond investor demand has suffered over the past few months with the onset of competing supply from the EU in the SSA market. Despite that, investors have been broadly optimistic on the outlook, particularly in intermediate maturities.

Credit Suisse has filled six roles in its sustainability strategy, advisory and finance (SSAF) group, headed by Marisa Drew, including a global head of net zero strategy.