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2 | June 2011 | ifr surveys COVERED BONDS French


dominance expected as peripheral woes continue


France will continue to dominate covered bond issuance this year and US legislation is expected to be introduced by the end of the year, according to the first annual survey conducted by IFR. The survey which was completed in May 2011 represents the views of over 140 market participants including investors and issuers as well as originators, syndicators and traders. By Aimee Donnellan


THE RESULTS SHOW there is a significant divergence of opinion in many sections of the market. In relation to the expected total public issuance in 2011, opinions are divided between a small minority 9.9% that forecast €200bn or less to a significant majority who believe that total issuance is likely to come anywhere between €200bn-€350bn. There was also an optimistic few (8.5%) that forecast above €350bn of issuance this year.


It’s worth noting that issuance in May was almost US$36bn, bringing deal volumes for the first five months of the year to US$215bn. On the year-to-date evidence, it looks like the top end of our range in the questionnaire could be hit. Optimism in the current market does not seem out of place. Since the beginning of January there has been a steady flow of covered bond supply that was kick-started by the first record week in January that saw €18.5bn sold. “By the end of last year, we all that thought we would see €190bn of issuance but after the first week of January we had to revise our predictions,” said Bernd Loder, of Barclays Capital’s covered bond syndicate desk. “There are a lot of new issuers looking to enter the market this year, which is driving up volumes. But nobody knows what will spook the market next,” he added.


When asked which country will lead this potential €300bn market, a majority of respondents (67.6%) pointed to French issuers. However 12.7% favoured Spanish issuers, which bar national champions BBVA and Santander, have had a very difficult time accessing the public market so far this year. “If the situation in Spain improves we could see Spanish issuance overtake the French,” said Arjan Verbeek, head of flow ABS & Covered bond structuring at BNP Paribas. French issuers have so far been responsible for a quarter of total issuance seen this year. And with the peripheral crisis continuing to cause nervous investors to invest in safe haven jurisdictions, French issuers are continuing to reap the rewards of an often volatile market.


While there is a certain amount of positive sentiment surrounding Spain’s future prospects, concerns surrounding


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