Global Rates Comment: EUR Covereds: Summer Pause, H2 Opportunities

Research evidence excerpt

Global Rates Comment: EUR Covereds: Summer Pause, H2 Opportunities

Global Research

30 July 2026ab

Global Rates Comment Interest Rates

GlobalEUR Covereds: Summer Pause, H2 Opportunities

Annalaura Capuano

Strategist

annalaura.capuano@ubs.com

+44-20-7567 1879

EUR benchmark covered bond issuance has reached EUR 127bn YTD, EUR

21bn ahead of last year, despite a sharp summer slowdown in July. After a

record June (EUR 25bn, the strongest June in five years), issuance dropped to just

EUR 1.1bn in July as geopolitical uncertainty and seasonal factors brought primary

activity to a near standstill.

Spreads have remained resilient despite elevated supply and increased

rates volatility. The Bloomberg EUR Covered Bond Index is only around 2bp

wider YTD, while improving H2 technicals, higher redemptions and lower issuance

should reduce net supply from EUR 30bn to around EUR 20bn by year-end,

supporting spread performance.

Primary market conditions remain healthy, although demand has

moderated from exceptionally strong levels seen earlier in the year. In secondary

spreads, France has been one of the best-performing covered bond markets YTD,

while Canada and the UK have underperformed amid tighter starting valuations

and increased issuance. Among 2026 new issues, Australian and CEE issuers

dominate the best performers.

Regulatory developments in Australia and Canada are supportive for non-

EEA covered bonds. Potential HQLA recognition in both jurisdictions could

strengthen the case for future equivalence treatment under European regulatory

frameworks.

AFL's planned entry into the covered bond market from 2027 could add

around EUR 1-1.2bn of annual French public sector covered bond supply. While

positive for AFL's funding profile, additional issuance could place further pressure