Covered bond redemptions boost supply hopes

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By Bill Thornhill
01 Jun 2020

Strong market conditions and tight spreads should encourage a few covered bond issuers to consider returning to the market in June, and though balance sheet optimisation is likely to remain the biggest driver of primary market activity, a surge in covered bond redemptions will play a critical role.

Covered bond spreads have tightened considerably from their worst levels and, with KBC attracting demand of €3.4bn for its €1bn December 2025 which was issued last week at 6bp over mid-swaps, it seems that investors are receptive to further supply. 

This is especially the case in the long end, ...

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