In the first week of July, some bonds that are exempt from withholding tax in certain European countries tightened by five or more basis points. Although tax-conscious retail and specialist investors in Switzerland have been buying grandfathered bonds in small chunks, according to Frank Will, frequent borrower strategist at RBS, retail accounts make up between 3% and 5% of the covered bond investor base, and should not be able to trigger that level of tightening. Arbitrageurs have seen a risk-free opportunity because market makers...
