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Are covered bonds a substitute for mortgage-backed securities?

Author

Listed:
  • Santiago Carbó-Valverde
  • Francisco Rodríguez Fernández
  • Richard J. Rosen

Abstract

Covered bonds and mortgage-backed securities both allow mortgages to be financed with duration-matched bonds. Given the problems in the MBS market during the financial crisis, some suggest that covered bonds might be a substitute for MBS. We examine the use of covered bonds and MBS in the U.S. and Europe, finding that the two are used for different purposes. Covered bonds are used more to increase liquidity than are MBS. MBS are more often used in ways consistent with exploiting some kinds of agency problems.

Suggested Citation

  • Santiago Carbó-Valverde & Francisco Rodríguez Fernández & Richard J. Rosen, 2011. "Are covered bonds a substitute for mortgage-backed securities?," Working Paper Series WP-2011-14, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-2011-14
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    File URL: http://www.chicagofed.org/digital_assets/publications/working_papers/2011/wp2011_14.pdf
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    References listed on IDEAS

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    1. Frank Packer & Ryan Stever & Christian Upper, 2007. "The covered bond market," BIS Quarterly Review, Bank for International Settlements, September.
    2. Hubbard, R. Glenn & Palia, Darius, 1995. "Executive pay and performance Evidence from the U.S. banking industry," Journal of Financial Economics, Elsevier, vol. 39(1), pages 105-130, September.
    3. Giovanni Dell’Ariccia & Deniz Igan & Luc Laeven, 2012. "Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 367-384, March.
    4. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 307-362.
    5. Wenying Jiangli & Matthew Pritsker, 2008. "The impacts of securitization on U.S. bank holding companies," Proceedings 1097, Federal Reserve Bank of Chicago.
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    Cited by:

    1. Ahnert, Toni & Anand, Kartik & Gai, Prasanna & Chapman, James, 2015. "Safe, or not safe? Covered bonds and Bank Fragility," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112875, Verein für Socialpolitik / German Economic Association.
    2. Carbo-Valverde, Santiago & Degryse, Hans & Rodríguez-Fernández, Francisco, 2015. "The impact of securitization on credit rationing: Empirical evidence," Journal of Financial Stability, Elsevier, vol. 20(C), pages 36-50.
    3. repec:eee:jimfin:v:81:y:2018:i:c:p:76-87 is not listed on IDEAS

    More about this item

    Keywords

    Bonds ; Mortgage-backed securities;

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