If a product swamps a market, prices go down. Yet this basic economic tenet seems to have eluded many of the issuers in the Spanish covered bonds market. How else to explain the consistent lack of coordination in issuance endemic in the world of the cédulas?
Talk to market participants and they will point to the period in late March and early April when three 15-year cédulas were launched in quick succession, which pushed spreads progressively wider. The bonds underperformed and inventory was left on the leads’ books....
