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Renewed credit turmoil and volatility led the European Covered Bond Council (ECBC) on Wednesday to suspend inter-bank market-making in covered bonds until Monday, Nov. 26. The move is a sign of the stress...
Covered bonds... are usually highly liquid and typically rated triple-A...
"It gives the market time to think." ... it even seems possible that inter-dealer market making will not be resumed this year,"
The ECBC set up the 8-to-8 Committee, consisting of the eight largest representatives of issuers and market-making banks, in September. It acts as an ad hoc advisory body to help restore trading stability in times of market disruption.
A key source of liquidity for cash-strapped banks – the covered bond market – appeared to be closed off yesterday after trading between banks in the secondary market was officially suspended and the mortgage bank Abbey was forced to abandon a new issue of bonds.
European banks agreed to suspend trading in the $2.8 trillion market for mortgage debt known as covered bonds to halt a slump that has closed the region's main source of financing for home lenders.
"We are in a deteriorating situation,"...
"There's a crisis of confidence for everything but AAA government bonds"...
"Conditions have really weakened over recent days,"... "Most investors are not willing to invest in the current volatile market."...
The first covered bond was issued in 1769 when King Frederick the Great of Prussia needed to rebuild the country after the Seven Years War against Austria an d Saxony.
ECB set to pump cash into money markets
On Friday night, the bank said it would inject an unspecified amount of extra liquidity next week, noting “re-emerging tensions” – and would do so until at least the end of the year.
Mr Trichet hinted that he expected financial turmoil to result in structural changes, saying banks’ losses “may trigger a reassessment by some of them of the suitability of the so-called originate-and-distribute business model”, which relies heavily on loan securitisation.
ECBC Press Release
... members of the ECBC’s 8-to-8 Committee will consult with their issuing and marketmaking peers in order to collect feedback from the market ahead of the Committee’s next meeting which will be before noon on Monday the 26th."
Many in Japan are starting to speak of “quitting America,” but they are not talking about a rise in anti-American political fervor. Rather, they mean a move away from American investments that is altering global capital flows and helping to weaken the dollar.
ECBC recommends resumption of covered bond trading
LONDON, Nov 26 (Reuters) - Inter-dealing market-making in the covered bond market should restart at 1330 GMT on Monday after a temporary suspension last week due to renewed market volatility...
In light of reduced liquidity in debt markets and sharp moves wider in bid/offer spreads, the ECBC said market makers are now obliged to make a minimum of 5 million euro ($7.4 million) by 5 million euro markets to one another on three times the normal bid/offer spreads.
This new condition will be in place until market making closes on Dec. 14, the ECBC said.