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The Irish covered bonds issued by Depfa Bank have been attracting strong interest, dealers reported this week, and further convergence to its Irish peers is still possible. There has been speculation that the bank will be wound down, not sold to an unrated entity, as investors might have feared.
Last week, Depfa's covered bonds, issued under Irish law, but backed mainly by German assets, had tightened by around 25bp and they were again well supported on Monday.
Depfa asset covered securities had underperformed the rally in other Irish covered bonds issued by Bank of Ireland and Allied Irish Banks, but dealers had always said it was only a matter of time before Depfa's bonds caught up.
The improved performance began towards the end of last week. The issuer's 2019s now trade 25bp tighter than a week before and stood at around...