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Chicago Fed Letter, No. 257, December 2008
What Are Covered Bonds?
Covered bonds are debt instruments issued by banks and collateralized by specific pools of assets (home mortgages or, in the U.S., AAA-rated mortgage-backed securities, or MBSs). Much of the recent interest in covered bonds has arisen because some believe that they may be a new source of mortgage financing, providing banks with an alternative to the securitization of mortgages.
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