Covered Bonds in 2026: Record Supply, Growing Diversification & Supportive Technicals

This report by UBS Global Rates Strategy examines covered bonds in 2026. Euro benchmark issuance has reached EUR169bn YTD, exceeding full-year 2025 volumes and nearing the EUR175bn-180bn forecast range. Total issuance across currencies is nearing EUR220bn equivalent, already above full-year 2025 levels. USD and GBP issuance have reaccelerated, complementing strong EUR supply, with Canada, Germany and France the largest contributors, supported by redemptions and strong cross-currency demand. Supply is set to slow, with net EUR supply projected to fall from EUR53bn to around EUR20bn by year-end. Demand remains concentrated in sub-5y maturities, while longer tenors still require concessions. USD covered bonds offer attractive value, with some 3y-4y bonds yielding around 40bp over KfW. Within French rates, UBS continues to prefer covered bonds over OATs and agencies given their defensive characteristics;