Our ratings outlook on covered bonds remains stable, despite geopolitical tensions, market turbulence, the economic slowdown, and deteriorating asset performance. Overcollateralization should absorb any increase in losses, and unused notches of uplift in the ratings reduce the risk of covered bond downgrades even if there are downgrades among issuers. The return to positive real interest rates will take a toll on economic growth, but we expect a soft landing for the European economy. Inflation is past its peak, and we expect the European Central Bank (ECB) to gradually cut rates in the second part of 2024. Benchmark European covered bond issuance hit a ten-year high in 2023, with issuers focusing on secured funding as they repaid earlier borrowings from central bank liquidity schemes. The trends supporting covered bond issuance may be slightly weaker in 2024, but issuance will likely remain close to recent highs, at about €160 billion.