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Covered bond traders find their voice

Sifma’s new covered bond group seeks to find a consensus among traders. But with no public covered bond market in evidence, why now?

The Securities Industry and Financial Markets Association has launched the latest association for European covered bond participants. The European Covered Bond Dealers Association (ECBDA) will represent traders in the European covered bond market and is the latest attempt to bring something approaching normality back to covered bonds. Sifma feels that the covered bond dealer community needs to establish a consensus view on how to get money moving again, and that the ECBDA will help achieve that. But is this the right time to be inaugurating a covered bond association when there is really no covered bond market to speak of?

Eleven banks have so far agreed to join Sifma’s new initiative, or 10 if you count Commerzbank and Dresdner as one. Each has paid €50,000 for the privilege, the annual fee for board membership (associate membership costs €10,000). Sifma hopes that the ECBDA will eventually be made up of 15 or 16 members, and certainly there are some big names that have shunned it so far. Such banks as JPMorgan, Citi, Credit Suisse and LBBW are not members yet, despite being historically big traders of covered bonds. It might be that such banks as these are unwilling to fork out €50,000 for membership in a covered bond association when there is no market.

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