The Use of Mortgage Covered Bonds

 
Author/Editor: Avesani, Renzo G. ; Garcia Pascual, Antonio ; Ribakova, Elina
 
Publication Date: January 01, 2007
 
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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.
 
Series: Working Paper No. 07/20
Subject(s): Bonds | Germany | Spain | Credit | Financial institutions | Economic indicators

Author's Keyword(s): Mortgage covered bonds | asset swap spreads | market based indicators
 
English
Publication Date: January 01, 2007
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2007020 Pages: 21
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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