Since the depths of the crisis, as some semblance of normality has returned to financial markets, covered bonds have regained their status as the poster child of a low-risk investment strategy. And its appeal has even broadened in recent years: some hedge funds looked at the market for the first time during the crisis, and, while few are still active buyers, a greater number of pension funds and insurance companies invest than ever before. Countries with established covered bonds markets – Germa

Talk to a German banker about Pfandbriefe and it will soon be remarked that the market has failed to produce a single default in 200 years. It is a record of which the country is justifiably proud. And as the statistic hints, the benchmark of the covered bond market has suffered little in the way of controversy. When something does disturb the usually still waters of the Pfandbrief market, therefore, it is not surprising that it causes quite a stir. So it was when the Pfandbrief market’s suprema

The fate of covered bond market for domestic US issuers seems to be in the hands of politicians. All eyes have been on Capital Hill, as congressmen hammer out the final version of the much-anticipated (and much-critiqued) financial reform bill, which could hit the president’s desk in July. A notable absence from either of the bill’s two current forms is any mention of covered bonds. For a package of legislation that purports to correct the mistakes that led to the credit crisis, the exclusion of

The Spanish covered bonds market, Cedulas, has been booming over the past year. This year, however, may see a sea-change as the effect of a sovereign downgrade, deleveraging financial markets and restructuring savings banks take effect. According to research by Moody’s Investors Service, Spanish Cedulas accounted for 17% of the European market at year end 2009. At that time Spain was the second-largest European covered bond market by volume, after Germany, it found. And in the first few months o

Opinion is divided over whether the €60bn covered bond scheme launched last May by the European Central Bank has achieved its aim. One thing bankers do agree on, though, is that the asset class will not want for support when the programme expires at the end of June. “All roads lead to covered bonds,” said Ted Lord, head of European covered bonds at Barclays Capital. “In this new era of volatility for the sovereign bond market, people are seeing even more clearly the ultra-safe quality of the cov

Talk to any covered bond expert and they will tell you that the asset class is inexorably linked to Germany and the German investor base. During the worst of the financial market crisis in 2009, German investors – banks, funds and insurance companies – were instrumental in supporting the covered bond market. So far in 2010, sources say, German investors have bought close to 50% of all the covered bonds issued in Europe. Germany has a long covered bond history. More than any other, the German inv

The covered bond market and the senior unsecured market usually display quite a strong correlation during favourable market conditions. Better issuers have questioned the validity of maintaining a covered bond programme because the costs do not justify the spread disadvantage, said Ralf Welge, head of financial institutions origination at Commerzbank. During a downturn, however, issuers are often more content to have a covered bond programme in place, due to potential difficulties in raising mon

Primary market issuance in the peripheral countries started strongly this year, with 14 jumbo covered bond transactions totalling €17bn launching, compared to a total issuance volume of €72.2bn from 59 deals year to date. Nine deals have originated from Spain, three from Portugal and two from Italy. January and March were the strongest months for issuance, with five and six deals respectively. February saw a single transaction and only two were issued in April. The last benchmark from the periph

The Nordic region learned its lesson well after its own crisis nearly two decades ago. “Nordic issuers managed the Scandinavian market crises of the early 1990s and took their conclusions for future challenges,” said Monika Rast, head of origination/international financial institutions at UniCredit in Munich. The experience has given them a very conservative outlook. “Nordic issuers offer high quality of cover pools with low LTVs and well seasoned loans, have high transparency standards and inve

In recent years, several European countries – including the UK and the Netherlands – have drawn up specific legal frameworks for their covered bond markets. In the wake of the credit crisis, such a move seemed pertinent, and it was deemed important both to assuage investor worries and to protect issuers in the midst of a squeeze on liquidity. France, being a key player in Europe, with nearly a quarter of the market share in terms of issuance, is the latest to rethink the boundaries of its existi