ECB should now taper covered bond purchases

The covered bond market showed its value this week as it enabled a wide range of banks to borrow in choppy conditions, across a range of tenors. But spreads are artificially tight and the sooner the market can normalise, the better. The ECB’s announcement that it can now buy up to 33% of each public sector bond in its QE programme, from 25% previously — suggests it now has the flexibility to taper covered bond buying.