November 22, 2007 (LPAC)--A third bank, Abbey National, the British arm of Spain's Banco Santander, has now been forced to pull out of the sale of the mortgage-backed bonds called "covered bonds." It joins Allied Irish Bank (Ireland) and Ahorro y Titulazicon (Spain), who also ran into trouble with their covered bonds trade.

A source with the German Association of Covered Bonds told this news service on the phone this morning that the covered bonds problem emerged mainly in Spain and Britain, where private investors were scared out of those bonds. Many of these bond-holders apparently came under acute pressure in the most recent period to get liquidity by selling such bonds, but the banks have also been having problems finding buyers. Eurohypo, the real estate branch of Commerzbank, reports traded volumes up to 20 percent below the average volumes traded in the uncovered bonds market in 2006. The market trading volume in this sector usually is several hundred million euros every day, but that's no longer the case, the aforesaid banking source said. And, there is a trend among investors to shift from these covered bonds to state bonds, which look like a safer investment.