The Use of Mortgage Covered Bonds

By Renzo G Avesani, Elina Ribakova, Antonio Garcia Pascual

January 1, 2007

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Format: Chicago

Renzo G Avesani, Elina Ribakova, and Antonio Garcia Pascual. The Use of Mortgage Covered Bonds, (USA: International Monetary Fund, 2007) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The rapid mortgage credit growth experienced in recent years in mature and emerging countries has raised some stability concerns. Many European credit institutions in mature markets have reacted by increasing securitization, particularly via mortgage covered bonds. From the issuer's perspective, these instruments have become an attractive funding source and a tool for assetliability management; from the investor's perspective, covered bonds enjoy a favorable risk-return profile and a very liquid market. In this paper, we examine the two largest "jumbo" covered bond markets, Germany and Spain. We show how movements in covered bond prices can be used to analyze the credit developments of the underlying issuer and the quality of its mortgage portfolio. Our analysis also suggests that mortgage covered bonds could be of interest to other mature and emerging markets facing similar risks related to mortgage credit.

Subject: Bonds, Covered bonds, Credit, Credit risk, Financial institutions, Financial regulation and supervision, Money, Mortgages

Keywords: Asset swap, Asset swap spread, Asset swap spreads, Bonds, Covered bond, Covered bond bond market, Covered bond legislation, Covered bond market, Covered bonds, Credit, Credit risk, Europe, Financing, First mortgage covered bond fundraising program, Market based indicators, Mortgage covered bond bond market, Mortgage covered bonds, Mortgages, WP

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/020
Stock No:

WPIEA2007020
ISBN:

9781451865844
ISSN:

1018-5941

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