What Is a Covered Bond?
July 8, 2008
Felix Salmon submits:
What
is it about covered bonds which makes them so impervious to English?
Hank Paulson had nice things to say about them today, but if you didn’t
know what they were already, the WSJ explanation would hardly shed much light on the matter:
Covered bonds, which are widely used in Europe, are a
mortgage-backed security that usually provides funding to a commercial
banks through a secured debt instrument collateralized by a pool of
residential mortgage loans that remain on the issuer’s balance sheet.
Interest is paid to investors from the issuer’s cash flow, as Mr.
Paulson noted.
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