Covered Bonds Hitting a Wall?

News this week that at least one new issue of covered bonds was pulled back from the market, may be a signal that this purported ‘savior of securitization’ might have its limits.

Much of the record level of activity in the covered bond market took place in Europe in 2010.  In total, more than US$356B in covered bonds were issued last year.  This first week of 2011 was expected to pick up right where last year left off, as more than US$13B in new issues came to market. 

However, spreads grew to the point where The Financial Times reported on January 6th that the Norwegian Bank, Sparebank, decided to pull their transaction until the market improves.

Many have felt that there was always going to be an upward limit to market appetite for these structures.  Perhaps that ceiling is now coming into view.

About markferraris
Managing Principal Orchard Street Partners LLC

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