Relax, covered bonds will be this way for a while

It has been another topsy-turvy month in the covered bond markets. In the first week of June Danske Bank issue a €1.25 billion, five-year mortgage-backed deal at 20 basis points over mid swaps. The Danish bank launched the deal with no pre-sounding, and had it all away within a day. But ECB president Jean-Claude Trichet’s hawkish comments on inflation shortly afterwards brought the market back down to earth, and big hits were taken by many investors, especially those sitting on shorter-dated paper.