Scope has published the final version of its covered bond rating methodology. The methodology update, which follows a call for comments released on 10 May 2024, has no rating impact. Scope has not received any comments.

The introduction by Poland’s financial supervisory authority (KNF) of a long-term finance ratio for residential mortgages could provide a boost to Poland’s hibernating covered bond market. Green covered bonds could become the instrument of choice.

European ESG corporate bond issuance surged to EUR 93bn-equivalent in H1 2024, keeping pace with the torrent of overall market activity and stabilising at around 25% of total bond volumes. We expect full-year ESG issuance to grow 40% year over year.

The German government is maximising the modest leeway it has under the so-called debt brake to inject public funds into the economy, but the measures are insufficient for addressing the country’s large and widening investment gap.

Egypt’s public finances remain vulnerable to external shocks given the government’s limited fiscal space though external support, increased foreign direct investment and progress on reforms are improving resilience.

This year will not set any records for investor-placed covered bonds. After moderate-to-strong activity for most of the year, issuance in June was the slowest in over 10 years. But we still believe our projected volume of EUR 170bn for 2024 is feasible.

The new structured finance methodology is specific to residential mortgage-backed securities, mainly in Europe.

There is less than six months to go until the property value in the updated Capital Requirements Regulation takes effect. This could have a notable impact on covered bonds as market values are directly linked to the amount of bonds that can be issued.

Interest-rate cuts boosting loan demand and improving net interest margins were supposed to drive French banks’ performance in the second half but political uncertainty has put investment decisions on hold while mortgage demand was already hesitant.

A hung parliament in France mitigates risk of significant fiscal slippage due to the policy agendas of the far right or radical left. Still, reform momentum will likely stall given the need for compromise by centrist parties and the political extremes.