Covered bonds have drifted wider over the last few weeks, reflecting heavier than expected supply and diminished market maker interest. Even so, the primary market is functioning healthily, boding well for prospective debut deals from Münchener Hypothekenbank and SMBC, deals that could surface as early as Tuesday.
The iBoxx covered bond index drifted about 1bp wider last week and though the move was led by Nordic markets, it was broad based. On Monday, a secondary market dealer blamed the widening on “persistent high new issue premiums” coupled with higher than expected supply and the European
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