Covered Bond issuance volumes have dropped 39% compared to the same period in 2012, on the back of better financing options offered by the European Central Bank, according to a report published by CMDPortal.
In the first 7 months of this year, global covered bond issuance (of deal size USD250m and above) reached $100.5 billion.
European banks are finding cheaper funding option via the ECB programs and issuance in the covered bond market is not expected to pick up in the next few months. “Issuers will continue to benefit from excess demand conditions due to a lack of supply,” according to the report.
However the lull in core European Bank issuance has opened up the market to peripheral European countries, as well as foreign issuers.
Spanish bank Santander issued a €2 billion covered bond this year. The issuer raised the funds in a 2.875%, 5-year deal in January, which was priced at a spread of 195bps over mid-swaps.
In July this year, the Royal Bank of Canada also issued a EUR2bn 1.625%, 7-year deal, which was priced at a spread of 16bps.