Covereds will shine when it rains

By Bill Thornhill
05 Jan 2021

Financial institution borrowers are expected to concentrate efforts on their more difficult trades at the start of this year, reflecting the view that credit conditions cannot get much better — a prudent approach to funding. But the economic recovery is unlikely to be as smooth as expected, and although central banks stand ready, credit market volatility should revive covered bonds as the rainy day funding product of choice.

Four or five covered bonds typically surface every day during the first full week of the year. But this year only one was issued — Tuesday’s €500m deal from Aareal Bank — and bankers are admitting that the pipeline is bare.

In contrast, subordinated deals from Crédit Agricole ...

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