Covered Bonds under Unconventional Monetary Policy (eBook)

Holger Markmann is PostDoc at the Real Estate Management Institute (REMI) of EBS Universität für Wirtschaft und Recht and Managing Director of a real estate investment firm. His research focuses on real estate capital market financing, bank funding, and unconventional monetary policy. Prior to his current roles, he worked for a bulge bracket investment bank, advising financial institutions on their M&A- and capital market activities.

Foreword 7
Preface 8
Table of Contents 9
List of Figures 11
List of Tables 12
List of Abbreviations 13
1 Introduction 15
2 Covered Bond Market 18
2.1 Background 18
2.2 Supply through Bank Funding 22
2.2.1 Comparison to MBS and Senior Unsecured 23
2.2.2 Emission Motives 25
2.2.3 Regulatory Considerations 27
2.3 Investor Demand 27
2.3.1 Risk Profile 27
2.3.2 Return Considerations 29
2.3.3 Investor Groups 29
2.3.4 Regulatory Considerations 30
2.4 Market Structure and Pricing 31
2.4.1 Yield Development 31
2.4.2 Credit Risk 33
2.4.3 Liquidity 34
3 Unconventional Monetary Policy 36
3.1 Background 36
3.2 Unconventional Monetary Policy in the Eurozone 37
3.2.1 Global Financial Crisis and Banking Crisis 38
3.2.2 Sovereign Debt Crisis 41
3.2.3 Deflationary Pressure and Fragile Growth 44
3.3 Covered Bond Purchases in other Currency Areas 45
3.3.1 Swiss National Bank’s Covered Bond Purchase Program 45
3.3.2 Federal Reserve’s Large-Scale Asset Purchases 1 46
3.4 Transmission Mechanism 47
3.4.1 Transmission Mechanism in General 48
3.4.1.1 Signaling Channel 49
3.4.1.2 Portfolio (Re-)Balancing Channel 50
3.4.1.3 Liquidity Premium Channel 50
3.4.1.4 Bank Lending Channel 51
3.4.1.5 Foreign Exchange Rate Channel 51
3.4.2 Transmission Mechanism of Covered Bond Purchases 51
4 Impact on Emission Activity 54
4.1 Data and Methodology 55
4.2 Results 57
4.3 Subsidiary Conclusion 60
5 Medium-term Impact on the Secondary Market 62
5.1 Literature 63
5.2 Data and Methodology 68
5.3 Results 75
5.4 Subsidiary Conclusion 82
6 Short-term Announcement Impact on the Secondary Market 85
6.1 Literature 86
6.2 Data and Methodology 92
6.3 Results 98
6.4 Subsidiary Conclusion 108
7 Monetary Policy Implications 109
7.1 Periods of Bank Funding Stress 109
7.2 Sovereign Debt Crises 111
7.3 Periods of Deflationary Pressure 112
8 Conclusion 114
8.1 Research Deficiencies and Opportunities 114
8.2 Summary 115
List of References 117
Appendix 128
Appendix 1: Goals of CBPP1 to CBPP3 128
Appendix 2: Unit Root Test 129