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Covered Bonds Outlook Midyear 2022: The Meaning Of Higher Interest Rates

Monetary policy normalization has led to a sharp recovery in covered bond issuance in the first half of 2022, as access to cheap central bank funding begins to diminish. However, we expect volumes to decrease in the second half of the year. We expect eurozone consumer price inflation to average 7.0% this year, prompting the European Central Bank to tighten monetary policy and further eroding household finances. Rising prices and interest rates will build pressure on weaker households, but we still expect only a limited credit impact on prime residential mortgage borrowers due to the high stock of household savings following the pandemic and a strong job market. This report provides a visual summary of the economic conditions, credit performance, issuance expectations and ratings outlook.


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