Euro

The SSA market is bouncing back from the Brexit shock more strongly than many bankers anticipated, as the State of Hessen picked up more than triple its minimum €250m target in the first trade to hit screens since the UK vote.

Covered bonds continued to benefit from the general improvement in risk appetite on Wednesday with peripheral and non-core markets seeing the best interest, though volumes are light. UK covereds, in both sterling and euros, also presented good value.

Standard Chartered Bank has hired an executive director for its European corporate DCM team.

Capital Markets Union, one of the European Commission's most lauded initiatives, is likely to be one of the early casualties of the UK's decision to exit the European Union.

Covered bond sentiment improved on Tuesday in line with the wider credit market and despite negative rating actions on the UK sovereign. Technical factors are likely to continue to support spreads over the next few weeks. Though weak UK fundamentals could lead to issuer downgrades in the longer term, covered bond ratings are relatively well protected.

Spain’s 10 year bonds on Monday reversed all their Brexit driven losses, after the country’s voters showed a clear preference for pro-European Union parties at a general election on Sunday.

In the devastating aftermath of Friday’s UK referendum result, UK covered bonds have been marked wider in contrast to peripheral national champions that have benefitted from some short covering interest at the long end.

Bank investors of Norwegian and Swedish covered bonds will be obliged to hold more capital against their investments from next week. Though this is likely to have implications for a considerable number of noteholders, the absolute change is small and is unlikely to affect demand, said analysts at Danske Bank research.

The covered bond market reacted stoically to the surprising outcome of the UK’s referendum to leave the European Union with the primary market expected to restart in two weeks.

Capital markets people thought Brexit would not happen because the UK electorate always chooses the sensible option in the end. But it hasn’t.

The UK may have knocked the eurozone periphery off a cliff as it stumbled on its way out of the European Union on Friday morning. Government bond spreads on Friday echoed those during the eurozone sovereign debt crisis. The gap between Germany and the periphery has opened up like the chasm that has developed between UK voters and the political establishment.

Capital markets have been hit by a cataclysm, the worst political shock since 11 September 2001 — though the immediate effects on financial markets may not be as grave as those of the 2008 financial crisis, because the solvency of banks is not in question.