Fixed Income Analysis /

Covered Bond & Agency Monitor - Strong start for SSAs, covered bonds more gradual (English version)

    Franz Rudolf
    Franz Rudolf

    Head of Financials Credit Research

    Julian Kreipl
    Matthias Dax
    14 January 2021
    Published byUniCredit
    • Covered bond market telegram: Happy New Year! The covered bond primary market started very sluggish in 2021 with just two deals in the first six trading days. But hopefully the four deals yesterday will help jump-start the market. We expect a total gross supply of EUR 95bn and an overall negative net supply of EUR 38bn this year. In secondary markets, spreads traded overall stable.
    • SSA market telegram: The year 2021 started with very strong supply in the SSA primary market and several benchmark transactions. This week, the EUR-denominated market was the focus, supplemented by some transactions denominated in USD and GBP. In the secondary market, the iBoxx Sub-Sovereign index slightly tightened and the iBoxx Supranationals index was the best performing sub-index.
    • Moody’s comments on legal risks in pan-Baltic cover pools: The proposed legal framework for Latvian covered bonds is expected to come into force at the end of 2Q21. For details of the legal framework, please see our Sector Flash from 10 December 2020. On 11 January, Moody’s published its comment on the proposed legislative framework, stating that it resolves legal uncertainties for pan-Baltic covered bonds with Latvian cover pool mortgages, a credit positive.
    • Treatment of UK covered bonds following Brexit: Following Brexit at the end of last year, UK covered bonds no longer benefit from preferred regulatory treatment and are treated in many aspects like other non-EU third country covered bonds. However, they do benefit from their G-10 membership status, which leaves them in the same category as Canadian covered bonds.