Covered bonds to refund LTRO

The outlook for the senior unsecured market will deteriorate as increasing encumbrance and a draft law on bank resolution dampens the euphoric rush of issuance that followed the European Central Bank’s unprecedented injections of liquidity, according to Barclays Capital. As a consequence, banks may increase covered bond issuance, there could be a third Long Term Refinancing Operation, or bank capital ratios might need to be improved.