The Use of Mortgage Covered Bonds

23 Pages Posted: 2 Feb 2007

See all articles by Elina Ribakova

Elina Ribakova

International Monetary Fund (IMF)

Renzo Avesani

International Monetary Fund - Monetary and Financial Systems Department

Antonio I. Garcia Pascual

International Monetary Fund (IMF) - Western Hemisphere Department; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 2007

Abstract

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 asset-liability 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.

Keywords: Mortgage covered bonds, asset swap spreads, market based indicators

JEL Classification: G10, G21

Suggested Citation

Ribakova, Elina and Avesani, Renzo and Garcia Pascual, Antonio I., The Use of Mortgage Covered Bonds (February 2007). IMF Working Paper No. 07/20, Available at SSRN: https://ssrn.com/abstract=961094

Elina Ribakova (Contact Author)

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

Renzo Avesani

International Monetary Fund - Monetary and Financial Systems Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Antonio I. Garcia Pascual

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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