The relatively low volume of new euro benchmark covered bonds issued so far this year (down 23% compared with 2024, as at 15 May 2025) is likely to have contributed to the fact that the risk premiums of covered bonds on the secondary market have remained fairly stable overall in recent turbulent weeks with high uncertainty on the capital markets due to US tariff policy.
Since mid-February 2025, the z-spread of the iBoxx € Covered Index has hovered around the 45 bps mark (see upper chart). However, it is also true that the daily fluctuation range of the risk premium has increased. A development that already began in June 2024 in the wake of the surprising announcement of new elections in France. In this respect, the increased political uncertainty (including the trade dispute) of recent months is also reflected in the covered bond market. Compared to SSA bonds, however, covered bonds react noticeably less to these risks. On a monthly average, the daily spread changes (absolute values) of the z-spread of the iBoxx € Agencies Index have risen noticeably more sharply since June 2024 than the iBoxx € Covered Index (see lower chart). Against this backdrop, covered bonds currently appear to be less volatile than SSA bonds. However, one reason for this could also be the lower liquidity in the covered bond segment compared to SSA bonds.
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