As Spanish savings banks known as cajas merge and create new private banks, covered bonds that pooled together the assets of several cajas will disappear, according to a recent report by Moody’s Investors Service.

For some time this collective approach helped smaller cajas access the market, but after the crisis the so-called multi-cedulas lost favor among investors because they typically included obscure and unrated cajas. The graph below shows how this discomfort led to a consistent 100 basis point spread between multi-cedulas and single-cedulas (single-issuer covered bonds) placed primarily by leading banks and cajas.

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