Bankers Experience Roadblocks in Selling Covered Bonds

By IVCPOST Staff Reporter

Jul 09, 2013 04:22 AM EDT

Bankers attempted to sell covered bonds around the world but were experiencing roadblocks. This was because investors like Pacific Investment Management Co said that trading debt from fledgling markets has driven them away. In fact, more than 90% of offerings this year came from recession plagued Western Europe. The region's sales of the securities started in Prussia in the 18th century according to a data compiled by Bloomberg. The shares from other markets slumped by 7.5% from 19% earlier this year. This was amid the encouragement from countries including South Korea, Turkey and Panama to sell covered bonds.

Covered bonds are a form of banking financing backed by mortgages and guaranteed by the issuer. Initial offerings have failed to turn into regular issuance even as non-European bonds offered higher yields. Even with loan support in faster growing economies, regular issuance from IPOs still failed. Last month, the emerging market debt slumped the most since 2008. This made investors yanked money from bond funds after the Federal Reserve announced stimulus reduction.

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