Sunday , September 15 2019
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A European bank gets paid to borrow

Summary:
One of the common complaints about negative rates is that banks can’t pass them on to retail depositors, for now at least. But there are other people willing to pay to lend to a bank. Austria’s Erste bank is today issuing a 10 year covered bond at a negative yield – which would make it the first time a bank in this market would be paid to borrow for that length of time.The spread is now set at 6 basis points over mid-swaps, a key benchmark, which would translate to a yield of around -0.2 per cent. That isn’t putting off investors -- institutions such as pension funds and insurance companies -- as the books are already in excess of €2bn.The covered bond market, a method of bank borrowing where the debt is secured against a pool of mortgages, is an important source of funding for the

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One of the common complaints about negative rates is that banks can’t pass them on to retail...

FT Alphaville
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