Hunt for liquidity exposes covered bond value

By Bill Thornhill
23 Mar 2020

The hunt for liquidity has driven covered bond spreads wider across the board with little fundamental differentiation between assets, investors told GlobalCapital on Monday. This move has thrown up opportunities to find value before liquidity is restored when the European Central Bank steps up its asset purchases.

Euro benchmark covered bonds issued last week by a range of Canadian banks suggest spreads are anything between 30bp-50bp wider than they were in mid-February, as opposed to the rather meagre 7bp widening suggested by Markit’s iBoxx euro covered bond index. 

As a consequence, the few ...

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