Covered bonds will continue to grow healthily into 2007, thanks to newcomers and new regulations, despite issuance slowing in some markets. The introduction of new regulations in Denmark and Norway, as well as the successful entrance of Portugal's big bank Millennium and Bank of America to the European covered bond market, has bolstered some variety in issuance trends. But issuance in both Germany and Spain - Europe's biggest covered bonds issuers - continues to cool, say market sources.

Dresdner Kleinwort Wasserstein reports that projected outstanding covered bond volume is projected to run 900 million, up from 750 million in 2006. Jumbo issuance volume is also expected to increase, to 210 million this year, compared with 180 million in 2006. And new legislation in Norway and Denmark should help to build volume expectations further this year. The new covered bonds legislation passed by the Danish parliament last week will enable commercial banks to issue covered bonds, whereas prior to the new law, only specialized mortgage credit institutions could issue mortgage covered bonds. Norway also passed similar laws.

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