Covered bond bids evaporate as short end goes into meltdown

Volatility
By Bill Thornhill
18 Mar 2020

The dash for cash has had big repercussions on the short end of the covered bond market, where yields are now positive, even for German names.

Bank trading balance sheets are stuffed full, with bid side liquidity rapidly drying up, said dealers on Wednesday. Trading has been further challenged by the extreme Bund/swap spread tightening this week, which has effectively negated the improvement in value that followed a widening of covered bonds to swaps.

“We ...

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