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Bond Outlook by bridport & cie, February 9 2011

Back to the future: the return of the securitised asset-backed bond, issued this time by banks for their own needs. This plus Irish shenanigans on bank debt.

Bond Outlook

How strange that most new bond issues are now for banks, and that most of them are covered bonds. These are not quite the same as asset-backed bonds as covered bonds are on the banks’ balance sheets. Nonetheless, there are signs that the securitisation of asset-backed loans is again coming to the forefront. Just as last week we suggested that in the USA the economy had returned to its pre-crisis characteristics of continually expanding indebtedness at all levels – which apparently rejoices American politicians and commentators – so the return of asset-backed bonds is also somewhat “back to the future”. This time, however, investors are a little more aware that they cannot really understand the solidity of the underlying assets (notably mortgages and car loans).


If banks in general are no longer issuing unsecured debt, the events in Ireland are causing further turbulence in the banking sector.

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