Covered falls behind senior but its potential is still good

Good news has been hard to come by in the covered bond market of late. Three years of declining volumes has left the market a shadow of its former self. But with €444bn of supply posted with the ECB, there is tremendous potential for substantial growth, especially since the senior unsecured funding is likely to become more expensive. But issuers will need to pay careful attention to encumbrance as regulatory scrutiny will only increase.