The world welcomes the covered bond

Two landmark deals at the end of 2006, by HBOS and Washington Mutual, marked a turning point in the history of the covered bond. After months of speculation and anticipation, finally the covered bond — a cornerstone of the European debt capital markets but virtually unknown in the US — had broken into a new and potentially vast investor base. While the outlook is positive, concerns of market fragmentation and conflicts with the existing US investor base for mortgage backed securities means there is much work to do to fully capitalise on this fledgling market.