Covered bonds--a timely alternative: with the mortgage-backed securities market still pretty frozen, banks and other lenders might consider issuance of covered bonds as an alternative financing method.

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Covered bonds--a timely alternative: with the mortgage-backed securities market still pretty frozen, banks and other lenders might consider issuance of covered bonds as an alternative financing method.

With the current stall in the securitization markets and the issue of liquidity gaining predominance, it may be a good time for banks to explore a different option for leveraging the mortgage collateral held on their balance sheets. Covered bonds offer a vehicle for a financial institution to issue debt that is backed (or covered) by a pool of mortgages. Unlike in securitization, these mortgages remain on an issuer's balance sheet, but the collateral security that they provide allows the debt to be issued at a lower cost than other funding vehicles. Covered bonds are a mature product in Europe, but are just starting to...

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