In a report released this morning, Standard & Poor's analysts said covered bond issuance in 2012 should benefit from a bias for secured funding. 

Next year the rating agency expects the sector to benefit from banks' shift toward secured funding sources.

Although the issuance in the sector will probably be like 2011, developments that concerning the current sovereign crisis as well as related policy actions will continue to present a wide range of upside and downside risks.

The positives factors for covered bonds include the rising cost to banks of unsecured funding, the European Central Bank’s second covered bond purchase program, and the wider adoption of covered bond technology.

Many countries, S&P analysts said, are either enacting covered bond legislation for the first time or strengthening their existing frameworks. The sovereign and bank rating actions will impact ratings more than credit performance of cover pools, the rating agency believes.

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