DexMA spread levels create potential for outperformance

Two weeks of pressure on French covered bond spreads in the secondary market have pushed Dexia Municipal Agency’s outstanding paper to new wides. In the last two days however, spreads have tightened moderately and settled up to 100bp wider than where they were before the market re-opened on August 25. Fortunately the bank has finished its long-term funding for the year, and even if spread levels make public issuance economically prohibitive, it has developed other funding tools. Covered bond analysts see value for investors in buying their bonds now.