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What Are Covered Bonds?
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December, No. 257

This article explains covered bonds and their usefulness as an alternative to mortgage-backed securities for home financing.

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Last Updated: 11/13/2008

What Are Covered Bonds?

Richard J. Rosen

Covered bonds are debt instruments issued by banks and collateralized by specific pools of assets (home mortgages or, in the U.S., AAA-rated mortgage-backed securities, or MBSs). Much of the recent interest in covered bonds has arisen because some believe that they may be a new source of mortgage financing, providing banks with an alternative to the securitization of mortgages.

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