Thomson Reuters IFR Roundtables
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It has been a remarkable year for the covered bond asset class. The record number of new issuers that have entered this market is particularly striking. So is the record widening of spreads, later culminating in an equally dramatic tightening after the ECB waved its magic wand. The prospect of new jurisdictions creating covered bonds markets, or the reintroduction of so-called fallen angels, which in some cases have been in exile for a number of years, sets the scene for an exciting 2010.
There was a time at the beginning of 2009 when some analysts were unwilling to put a figure on potential jumbo issuance. Others went so far as to suggest that the first half of the year would not bring any jumbo issuance whatsoever. And for some jurisdictions, they were right - but not where Pfandbriefe were concerned.
The sovereign market faced two main challenges this year: a growth in its own capacity to raise ever larger amounts of debt, and the additional competition posed by the government guaranteed bank sector. The participants at this year's IFR Sovereign Roundtable were generally in agreement that neither of these had significantly changed how national debt offices go about their everyday role of financing their budget deficits.
Brazil’s capital markets are abuzz with behind-the-scenes activity as issuers talk to potential leads about bringing more than US$16bn worth of local and international supply in the coming months. But the tone remains cautious as issuers come to terms with wider rates and look to justify the higher costs vis-a-vis the duration of their investment programmes and their expected returns.