Covered Bonds
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◆ Smaller cover pools suppress funding needs ◆ Issuers consider benchmarks instead ◆ German and Austrian lenders provide bulk of supply -
◆ Prefunding discussions to pick up in the autumn ◆ Elevated spreads are deterring supply ◆ US election will dictate demand
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Digital bonds will struggle to take off if they do not fit into regulatory regimes
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◆ Savings banks interested in novel technology ◆ ‘Vivid’ secondary market anticipated ◆ Lack of LCR and ECB eligibility a hindrance
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Funding official joins after nine years at the Danish National Bank
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◆ Average benchmark tenor up from 2023 ◆ Seven years proves popular ◆ Longer dated deals look unlikely
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◆ New issue premiums return to euro covered issuance ◆ Issuers unable to tighten despite wider starting spreads ◆ French covered spreads could tighten
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◆ German banks raced out of the blocks this year ◆ Slower loan book growth to damp supply ◆ Pfandbrief spreads unlikely to tighten
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To insist that bankers only pursue jumbo deals is akin to asking traders to only buy stocks that go up
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Which assets will dominate when issuance returns depends on whether borrowers choose to tackle their more difficult trades first
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Pfandbrief lender plans only two weeks of marketing, down from the eight needed by KfW
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◆ New legislation will drive supply ◆ Covered bonds become a crucial part of Polish funding mix ◆ Up to €1bn of fresh paper expected this year
