Covered bonds to escape tiered deposit widening effect

ECB sign 230x150
By Bill Thornhill
15 Oct 2019

The European Central Bank’s decision to introduce deposit tiering should have meant less demand for negative yielding covered bonds. However, there has been little evidence of sustained selling and bank analysts are optimistic that demand will hold up.

The eurozone banking system has €1.9tr in cash sitting at the ECB which had been earning minus 0.5%. However, after the ECB introduced a tiered deposit scheme, approximately €800bn of this liquidity will be charged at 0%.

One banker thought tiered deposit rates was therefore likely to ...

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