#8 - Covered Bond Research

After a single issuance yesterday from Iccrea Banca , primary market activity showed improvement this morning with three additional transactions . These transactions received a strong investor reception with an average order book of €2.3bn. It was supported by the selected maturities, within the 5-6 year range and a significant reduction in supply, down 29% year-on-year. France in particular experienced a -39% year-on-year decline, translating to a decrease of €9.8bn. Year-to-date, euro benchmark covered bond issuance amounts to €62bn. On 25 April 2025, the EBA released an ESG dashboard that benchmarks and evaluates the transition and physical climate-related risks within the EU/EEA banking sector. As of June 2024, nearly 50% of real estate lending in the EU is associated with an energy performance rating of 200 kWh per square meter, remaining stable compared to the previous semester. YTD ESG labeled covered bond issuance reach €8.75bn, representing a 10% decrease compared to the same period in 2024. However, this contraction is notably less pronounced than the 29 % decline observed in the broader euro-denominated covered bond market.   On 28 April 2025, Fitch invited market participants to provide feedback regarding the assessment of climate risk in residential and commercial mortgage-backed securities, as well as covered bond ratings. The rating agency emphasizes that exposure to physical climate events must be integrated into its covered bond methodology.