ECB struggles with covered bonds, as do all investors

ECB sign 230x150
By Bill Thornhill
08 Apr 2021

The European Central Bank's covered bond purchases remained weak in March and, with issuance expected to stay anaemic for the foreseeable future, it will struggle to prevent its portfolio from shrinking. While this is positive for spreads, returns this year have been abysmal and, in the absence of supply, investors are being squeezed out.

The ECB bought a net €616m covered bonds in the primary market in March. However, with secondary market liquidity slowly but surely drying up, it was unable to prevent its secondary market covered bond portfolio from shrinking by a net €350m.

As such, the overall covered ...

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