UBS Global Rates Strategy: 2026 Covered Bonds: Record Supply, Growing Diversification and Supportive Technicals
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UBS's global rates strategy team takes stock of the 2026 covered bond market. Euro benchmark issuance has reached €169bn year-to-date, exceeding full-year 2025 and approaching the €175–180bn full-year forecast range, while all-currency supply of nearly €220bn equivalent is already above 2025's total. USD and GBP issuance have re-accelerated alongside strong euro supply, with Canada, Germany and France the largest contributors, supported by buybacks and robust cross-currency demand. Issuance should now slow, with limited supply expected around the ECBC conference and ahead of the US midterm elections; euro net supply is forecast to fall from €53bn to roughly €20bn by year-end, keeping technicals supportive. Demand remains concentrated in sub-five-year maturities, and longer-dated deals still require spread concessions. On value, USD covered bonds look attractive, with some 3–4 year issues yielding about 40bp more than KfW. UBS continues to prefer covered bonds over OATs and agencies within French rates, citing resilience into budget season, sovereign rating reviews and election-cycle risk, and prefers Italy over France within covered bonds on better spread compensation and improving sovereign fundamentals, as French covered bonds have outperformed and look increasingly expensive.
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