Covered bonds: Covered bonds catch credit crunch cold

Although it is unlikely that troubles stemming from US sub-prime mortgages will have any seriously long-term detrimental effects on the covered bond market, nervousness among market participants completely drained liquidity from the sector at the height of the crisis. Participants found a fig leaf to disguise the breakdown in trading in the decision by market makers (meeting via a conference call arranged by the ACI financial markets association) to triple bid-offer spreads in late August.