Covered bond reward for risk is ‘very bad’

Spread trading screen adobe stock AS
By Bill Thornhill
27 Oct 2020

Covered bond spreads are unlikely to widen much say dealers, plenty of whom are long inventory, especially in recently issued deals. Deals that are ineligible for central bank buying programmes, however, are vulnerable.

Covered bond spreads have traded sideways over the past few weeks in core European markets, reflecting  deeply negative yields and that valuations are starting to look expensive compared to other asset classes.

“The 10 year area looks rich and is not attractive for bank treasuries,” said ...

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