European SSA supply is at 69% of the annual target, while EIB's credit quality supports tighter spreads versus EU

Overview

This report is Deutsche Bank's update on the covered bond and European SSA markets, focusing on CADES valuation relative to French government bonds, EIB's spread advantage versus EU, and year-to-date European SSA supply progress. The report notes that issuance by 50 large European SSA issuers has reached 69% of the full-year estimate, with the EU as the largest issuer; EIB, KfW and EU together account for 52% of year-to-date supply.

Core views

The core views are as follows: First, five-year CADES offers some yield pick-up versus EU and is slightly wider than AAA-rated French covered bonds. However, given that CADES bonds are essentially similar to less liquid five-year French sovereign bonds, current spreads versus French government bonds appear tight, making a switch trade reasonable. Nevertheless, if French sovereign spreads remain wide or widen further, CADES could continue to remain tight versus French government bonds. Second, EIB has very strong supranational issuer characteristics, with net supply of only approximately EUR 18bn, a strong AAA rating, an NPL ratio of only 0.28% in 2025, continuous profitability since its first financial year in 1958, and access to ECB and SNB repo facilities. It should therefore continue to trade tighter than EU. Third, overall European SSA supply is progressing quickly, but the remaining net EUR supply for the year is concentrated mainly in the EU.

Analysis framework

The report applies a fixed-income relative-value and supply-progress framework, comparing CADES with French government bonds, EU and AAA-rated French covered bonds on a spread basis, and assessing the market performance of issuers including EIB, EU, KfW, CADES and AGFRNC from the perspectives of issuance supply, rating resilience, asset quality, liquidity channels and issuer concentration.

Methodology notes

• Relative ValueSSA/Sovereign Spread Comparison

  Compares the relative spreads of the curves of CADES, EIB, EU and French government bonds.

  By comparing the relative spreads of five-year CADES versus FRTR, EU and AAA-rated French covered bonds, the report determines that CADES valuation is currently tight, while explaining that spreads could remain tight even in an environment of wide French sovereign spreads.

• Supply AnalysisFull-Year Financing Progress and Remaining Net Supply

  Measures supply pressure using year-to-date issuance as a proportion of the full-year estimate.

  The report calculates total year-to-date supply, EUR supply, net supply and remaining supply for 50 large European SSA issuers, and notes that the EU accounts for as much as 97% of the remaining net EUR supply.

• Credit QualityIssuer Credit Resilience Assessment

  Assesses EIB credit strength using ratings, asset quality, profitability history and central-bank liquidity channels.

  The report believes EIB's AAA rating, low NPL ratio, long profitability history, access to ECB liquidity operations, BCL cash reserves and SNB repo facility together support its spread advantage versus EU.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CADES

  SSA issuer relative to French government bonds and EU

  Strengths

  Offers some yield pick-up versus EU and may continue to maintain tight spreads relative to French government bonds while French sovereign spreads remain wide.

  Weaknesses

  The report views it as essentially similar to less liquid five-year French sovereign bonds, with current spreads versus French government bonds appearing tight.

  Comparison

  Five-year CADES is slightly wider than AAA-rated five-year French covered bonds but appears tight relative to FRTR Nov 2031.

  Risks

  The direction of French sovereign spreads, changes in liquidity premiums and unexpected additional supply could affect performance.

• EIB

  Strong AAA supranational issuer

  Strengths

  Low net supply, strong AAA rating, an NPL ratio of only 0.28% in 2025, a long profitability history, and access to ECB liquidity operations, BCL cash reserves and an SNB repo facility.

  Weaknesses

  The market is focused on the potential spillover impact of French credit quality on shareholder-weighted ratings and European supranational issuers.

  Comparison

  The report believes EIB trades and should continue to trade tighter than EU.

  Risks

  Deterioration in the European sovereign credit environment, concerns about a French rating downgrade or broad repricing of supranational spreads could create volatility.

• EU

  Largest year-to-date European SSA issuer

  Strengths

  Large issuance volume and a highly liquid curve make it one of the core pricing benchmarks in the European SSA market.

  Weaknesses

  The remaining net EUR supply for the year is highly concentrated in the EU, implying relatively higher supply pressure.

  Comparison

  EU year-to-date issuance is EUR 110.5bn, higher than EIB, KfW and others, while the EU accounts for EUR 49.1bn of the remaining net EUR supply.

  Risks

  Continued large-scale issuance could weigh on relative spread performance.

• KfW

  One of the major European SSA issuers

  Strengths

  Year-to-date issuance of EUR 64.4bn makes it one of the three largest issuers.

  Weaknesses

  The report provides no standalone relative-value recommendation.

  Comparison

  EU, KfW and EIB together account for 52% of year-to-date supply by 50 large European SSA issuers.

  Risks

  The direction of German fiscal policy and debt, overall SSA supply and interest-rate volatility could affect curve performance.

• AGFRNC

  French agency issuer

  Strengths

  It has completed the EUR 9bn annual financing estimate, leaving relatively limited remaining financing pressure for the year.

  Weaknesses

  If actual annual financing needs approach EUR 10bn, approximately another EUR 1bn could still be issued.

  Comparison

  Similar to CADES, its financing progress is close to or has reached the full-year estimate.

  Risks

  French sovereign spreads, additional agency supply and changes in investor pricing of France-related risks.

Key data

• Year-to-date total supply by 50 large European SSA issuersEUR 434.1bnUp 4.9% from EUR 413.8bn in the same period of 2025, equivalent to 69% of the full-year estimate of EUR 629bn.
• Year-to-date total EUR-denominated supply by 50 large European SSA issuersEUR 280.8bnAbove EUR 274.8bn in the same period of 2025; the EUR share is 65%, slightly below 66% in the same period of 2025.
• Year-to-date net EUR supply by 50 large European SSA issuersEUR 150.8bnAbove EUR 146.7bn in the same period of 2025.
• Remaining net EUR supplyEUR 50.5bnThe EU accounts for EUR 49.1bn, or 97% of the expected remaining net EUR supply.
• EU year-to-date issuanceEUR 110.5bnThe largest issuer, reaching 61% of the full-year estimate of EUR 180bn; issuance was EUR 94.8bn in the same period of 2025.
• KfW year-to-date issuanceEUR 64.4bnIssuance was EUR 54.5bn in the same period of 2025.
• EIB year-to-date issuanceEUR 50.4bnIssuance was EUR 53.4bn in the same period of 2025; EIB is regarded in the report as a strong supranational issuer.
• EIB 2025 NPL ratio0.28%The report cites this as important evidence of EIB's very strong credit quality.
• CADES year-to-date issuanceEUR 15.1bnIt has reached the full-year financing estimate of EUR 15bn and may exceed the original full-year estimate.
• AGFRNC financing progress100%It has completed the EUR 9bn financing estimate, and the report says it may issue approximately another EUR 1bn during the year.

Impact & implications

For investors, the report's implications mainly concern relative value and the distribution of supply pressure: CADES valuation is currently tight relative to French government bonds, so investors may monitor switch opportunities, although persistently wide French sovereign spreads could limit CADES widening; EIB's credit quality and low net supply support a premium versus EU; and the remaining net EUR supply for European SSA is highly concentrated in the EU, meaning supply pressure on the EU curve remains an important variable for subsequent SSA market pricing.

Risks

• A further widening of French sovereign spreads could alter the relative valuation of CADES, French agency bonds and French covered bonds.
• The high share of remaining net EUR supply accounted for by the EU could create sustained supply pressure on the EU and related SSA curves.
• The direction of German government debt is influenced by political and economic factors; continued fiscal expansion could affect the relative pricing of German agency bonds and European SSA.
• Fixed-income investments face risks including rising interest rates, upside inflation surprises, foreign-exchange volatility, declining liquidity and changes in issuer credit quality.
• Derivatives, foreign exchange and non-domestic-currency bonds also involve leverage, counterparty, settlement and foreign-exchange risks.

What to watch

• Changes in French sovereign spreads relative to swaps and other core European sovereign bonds.
• Whether CADES continues issuing after exceeding its EUR 15bn full-year financing estimate.
• The issuance pace and market absorption of the EU's remaining EUR 49.1bn net supply for the year.
• Updates from EIB rating agencies, shareholder-weighted ratings, NPLs and central-bank liquidity channels.
• Year-on-year trends in supply from European supranationals, German agencies, French agencies and Dutch agencies.