For a very parochial and distinctly conservative segment of the European securitization sector, covered bonds are doing well out of the credit crisis. According to analysts at Barclays Capital, covered bond issuance in the first half of 2008 was two thirds of its level in 2007, which they point out isn't at all bad given the 'state of the global money and capital markets.' Even more excitingly, it now looks as if the US is about to join the party.
For anyone in the dark as to what a covered bond is exactly, it's a bit like a mortgage backed security, except that as well being backed by mortgage loans as collateral, it's also backed by a bank's balance sheet. BusinessWeek has a good explanation here.
In the UK in particular covered bonds have been given a boost by the Bank of England's Special Liquidity Scheme, which allows banks to swap highly rated covered bonds for more liquid gilts.
The Co-operative Bank, Coventry Building Society and Clydesdale Bank have all set up covered bond operations in the past few months and that Barclays Bank issued two 1bn floating rate covered bonds for the first time earlier this month.
"This is some of the biggest growth I've seen in Europe," says Richard Kemmish, head of European covered bond origination at Credit Suisse.
In the US, meanwhile, Hank Paulson has mooted covered bonds as a method of encouraging investors back into the mortgage market. The potential is huge - the European covered bond market is worth $2.75 trillion and the US market is only 1% of that. Bank of America, Citigroup, JP Morgan Chase and Wells Fargo have all said they plan to issue covered bonds according to the Wall Street Journal.
The only hitch is that the rush of interest in covered bonds hasn't quite been matched by a rush of hiring.
Lee Thacker at search firm Silvermine Partners, says most banks are shifting talent internally: "They have a whole stack of investment grade ABS people just sitting there looking at each other."
The same, unfortunately, appears in apply to the US. "It's a new asset class for the US and we are using existing people at this stage," says Tim Skeet, head of covered bonds at Merrill.
Skeet says covered bonds could be a good career bet longer term, however: "It's a big opportunity. Most people should be looking at retooling themselves once every six months anyway."
He also says the US market will need Europeans with covered bond expertise to explain the new products to investors, but they'll need to be US-savvy: "You're looking at a fairly small group of people with the right profile."