There’s plenty to look forward to in 2026 — an outsider (England?) winning the World Cup or the World Bank annual meeting in Bangkok, for starters. But trying to refinance a massive pile of covered bond redemptions probably isn’t one of them.
Covered bond maturities will leap in 2026 as short-dated paper issued to repay Covid-era central bank liquidity schemes expires.
Euro benchmark maturities will rise to €149bn in 2026 — their highest since 2010, according to Dealogic. Only €112bn matured this year, with €128bn scheduled for 2025.
It wouldn’t go amiss to start thinking about refinancing or even pre-financing these bonds now — even in the dying days of 2024.
Of course, financing early could result in an increased cost of carry and there’s also the potential of rate cuts next year or beyond. Those could make it look foolish to lock in higher rates now.
But the funding task facing covered bond borrowers in 2026 is massive — let alone the following year, when redemptions are set to hit a record €183bn.
And without the European Central Bank there to buy everything anymore — like it did in the record funding year of 2022 — hitting these heights again could be tricky.
Issuers always talk about 'leaving something on the table' for investors — but perhaps it's time they took something off the table early instead.
Next year's smooth maturity profile and lower level of redemptions offers the opportunity for issuers to get started in earnest with 2026's refinancing.
Sure, this year isn't even over and 2025 has yet to begin — but banks might find it worth their time to already start thinking about the second half of the decade.