Tranche warfare: uphill struggle for euro safe bonds

Junior tranche and regulatory impasse are key challenges for pan-eurozone sovereign bond-backed securities

European policymakers rarely feel the need to emulate the US. But if euro government bonds were more like Treasuries, any eurozone member would enjoy a seemingly limitless investor base for its debt and the derivatives market could access a vast pool of high-quality euro collateral.

On January 29, a task force convened by the European Systemic Risk Board unveiled a 300-page report on how to build this kind of pan-European safe-haven asset, dubbed sovereign bond-backed securities (SBBS). The ide