Covered Bond

Covered Bond

Debt Securities backed by cash flows from Mortgage Loan Receivables. They are similar in many ways to Asset-backed Securities, but Covered Bond Receivables remain on the Originator’s balance sheet, and hence Secured Creditors are exposed not only to the Credit Risk of the Receivables, but also to the Credit Risk of the Originator.

Here are some examples of covered bonds:

• German Pfandbriefe: Pfandbriefe are covered bonds that are issued by banks in Germany.
• ABSA Covered Bonds: ABSA Covered Bonds are covered bonds that are issued by ABSA Bank in South Africa.
• Mortgage-backed securities: Mortgage-backed securities (MBS) are a type of covered bond that is backed by a pool of mortgages.

Covered bonds are a relatively safe investment, as they have a high degree of security. However, they also offer a lower yield than some other types of investments.