Investors force the pace
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Investors force the pace

In 2005, while issuers, underwriters, rating agencies and regulators have still been grappling with the question of covered bond identity, investor concerns have been more basic – spreads, yields, and the arrival of new investors. Mark Brown reports.

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HENRY FORD KNEW a thing or two about selling. “A market is never saturated with a good product,” he once said. Covered bonds must be a very good product – it’s apparently impossible to saturate the market for them. If you ask the European and Asian investor base as a whole what it wants, the answer appears to be yet more covered bonds.

Investors are unlikely to be disappointed. September was another strong month for primary issuance, with some issuers delaying their deals until later in the quarter to avoid a crowded month. Royal Bank of Scotland estimated that total covered bond issuance in September and October would be worth between €25 billion and €30 billion. Cédulas issuers have been the most fecund this year, contributing €10.5 billion to the new-issue totals in September. Last month, Banco Popular Español issued €2 billion with its first stand-alone cédula hipotecaria.

If 2005 was the year of the cédulas, 2006 could be the year of the Italian covered bond. Cassa Depositi e Prestiti (CDP)’s second benchmark priced on October 13.

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