Covered bond outlook 2025

Erste Bank Research Team Erste Bank

Covered bond market expected to stabilize

After a sharper-than-expected decline in issuance volume this year, we expect the covered bond primary market to stabilize in 2025. We expect new issues in the total market to amount to EUR 150-160bn.

In 2024, the growth trend in the ESG covered bond segment was broken for the first time. While the issuance volume still showed significant annual growth from 2019 to 2023, the volume has since fallen to just under EUR 17bn (previous year: EUR 22bn).

We assume that the further development of risk premiums for covered bonds will continue to depend largely on the development of swap spreads in the SSA segment in the coming months. It is therefore possible that risk premiums in the covered bond segment could remain at their current high level for the time being despite the limited supply of new issues.

Although the residential real estate market will remain under critical observation throughout Europe, the decline in residential real estate prices in the euro area appears to have bottomed out. In the area of commercial real estate (CRE), however, a sustainable recovery is not yet in sight. In addition to cyclical factors, the segment continues to struggle with structural problems (work from home, e-commerce).

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Erste Bank Research Team

Erste Bank

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