Double-digit spreads and scarcity assured strong momentum for banco santander and Yorkshire building society covered bonds last Tuesday, with the €3.5bn-plus demand for the UK name in particular stunning the market. Covered bond spreads that came under pressure in 2018 as the ECB started to taper its purchases have made a remarkable comeback in 2019. At the end of April, the average spread of the iBoxx EUR Covered index fell below 10bp for the first time since October 2018. However, unlike many other jurisdictions where euros spreads have returned to single-digit territory, Spanish and UK paper still offer double-digit spreads, a factor that was key behind the demand.
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