Pimco Shuns Korea to Turkey Covered Debt on LiquidityPimco Shuns Korea to Turkey Covered Debt on Liquidity – Bloomberg 07-08-13

Salient to Investors:

Investors say difficulty trading debt from fledgling markets is driving them away.

Timo Boehm at Pimco said new markets, such as South Korea or Turkey, don’t have sufficient liquidity.

Georg Grodzki at Legal & General Investment Mgmt said home loans used to support covered bonds vary across new markets, making it more difficult for would-be investors to analyze the notes. Grodzki said for markets to gain a sustainable foothold, you need a bullish tone in the market, and investors feeling good about the world and keen on extra yield, and the recent sell-off in the market and the EU agreement on bank resolution could reset the balance between senior unsecured and covered bond issuance.

Analysts expect South Korea and Australia to grow 2.5 percent in 2013, and the euro zone to record a second year of recession.

Ted Lord at Barclays said when you have a recession, people don’t necessarily go out and buy a house, so lending volumes are down because of that.

Read the full article at  http://www.bloomberg.com/news/2013-07-08/pimco-shuns-korea-to-turkey-covered-debt-on-liquidity.html

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Pimco Cools on Covered Debt After Record Rally: Credit Markets – Bloomberg 06-18-13

Salient to Investors:

Timo Boehm at Pimco has reduced bets on covered notes  as Europe’s covered bond market falls out of favor as investors seek better returns on their risk – some highly rated alternatives including sovereign-backed and agency notes are much cheaper. Boehm said covered bond sales this year will fall short of forecasts.

Covered notes – which have been sold in Europe since the 18th century and are backed by mortgages and public sector loans – are a the most expensive relative to quasi-government bonds since 2008. Moody’s said covered bonds supported by loans to small and medium-sized enterprises are gaining traction as a new funding tool.

Lucette Yvernault at Schroder Investment Mgmt said investors definitely have appetite for covered bonds, which is why they are trading extremely tight.

Gareth Davies at JPMorgan Chase said lending is moving in the right direction in Northern Europe, but it’s from such a low starting point.

Read the full article at http://www.bloomberg.com/news/2013-06-18/pimco-cools-on-covered-debt-after-record-rally-credit-markets.html

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