European Covered Bond Outlook 2021
DBRS Morningstar published its annual outlook for European covered bonds (CB). As we look forward to 2021 and what can be expected for the European CB markets, DBRS Morningstar finds there are a number of key themes that we believe will influence the market:• CB ratings expected to remain resilient. Issuer credit quality will be the key driver for CB ratings. Asset performance and sovereign risk likely to be secondary drivers of rating performance
• Increase in delinquencies and to a lesser extent foreclosures will be seen. Though CB are well positioned to withstand such deterioration in asset performance
• Overall issuance volumes expected to marginally increase over 2020, with increased weight of retained issuances expected. Greening of CB market likely to continue with more Green CB issuances.
• Harmonisation of CB frameworks will be implemented across EU jurisdictions. Germany, France, the UK, and the Netherlands will not need significant changes as most important requirements already met. Portugal and Italy will need to implement some new features. Spain will be most affected with several changes expected.
• The COVID-19 pandemic and its continuing economic impact will be negative in general many EU housing markets.
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Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
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