GC Asia
Covered rally thrives on cash not conviction
The secondary covered bond rally rolls on, grinding spreads tighter and pushing yields to their limit. But foresight and fundamentals have played no part in the lust for peripheral paper. As lucrative as the carry trade has been for banks, when things turn sour investors could find themselves trapped.
Since mid-January the secondary covered bond market has witnessed a rally of epic proportions. Curves beaten flat by sovereign turmoil late last year are now at a precipitous slant. Bank treasuries have ploughed cheap three year money courtesy of the European Central Bank into short dated peripheral covered
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