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EUROWEEK: Asset encumbrance has been grabbing the headlines or a while now but I’m not sure it’s such a negative factor from a covered bond investors’ perspective is it?

EUROWEEK: Covered bonds are excluded from bail in, but there still seems to be a question over the residual unsecured claim and voluntary collateral?

EUROWEEK: How do spreads affect your asset

EUROWEEK: Does it concern you that we might soon be seeing a reining back of central bank liquidity?

With the covered bonds becoming increasingly heterogeneous, investors and other key market players met in August to discuss the market’s evolution.

EUROWEEK: Does the evolution of the housing market or employment trends in any parts of Europe give cause for concern?

EUROWEEK: There has been a fair bit of talk about green covered bonds but from my perspective it doesn’t seem to have amounted to much.

EUROWEEK: Bank deleveraging, a surfeit of central bank liquidity and falling loan production have affected the market, while regulations look likely to cement in a long term structural bid from the institutional side. How long can we expect this technically supportive backdrop to continue exerting its influence on spreads?

Cortazar, BBVA AM: We see little value in investing in the core covered bond markets as spreads have become too tight. Though spreads have come in a long way in Spain and Italy they remain quite wide versus Germany and core Europe. But reforms are on the way and they will be implemented, which means over the longer term that spreads still have room to perform versus the core. A lot of challenges lie ahead but I think the worst is behind us so I am relatively positive on Spain.

EUROWEEK: Tell me about the pass-through

EUROWEEK: What’s your view on price discovery during bond syndication and pricing?

Eichert, CA-CIB: Covered bonds should be anchored to the issuer rather than the unsecured rating. The link to the issuer exists because covered bonds need a sponsor that is there to support the programme. With bail-ins of senior unsecured becoming possible we could have the situation where senior is bailed in but the bank continues to support the covered bonds. Unsecured is therefore not the correct starting point anymore. Rating agencies will have to rethink the way they award bank ratings with de-linkage between senior and issuer rating, and covered bonds being linked to the issuer rating.