The best hope for covered bonds in 2015

The third covered bond purchase programme will not expand the European Central Bank’s (ECB) balance sheet to the extent needed because the market is too small. And spread tightening will not encourage greater issuance, as the ECB expects. The best hope for covered bonds in 2015 is for the ECB to give up on CBPP3 and turn its attention to the sovereign market where it has a much better chance of success.