MARKET VIEW 13
„ Longer-term supply dynamics suggest European covered bonds will outperform European government bonds. Henrik Stille portfolio manager at Nordea Asset Management
ity,” points out Stille. These bonds are typically issued by banks and other financial institutions that, in the majority of cases, have strong balance sheets and high credit ratings. Furthermore, the cover pool assets that back these bonds are generally of high quality, such as mortgages or public sector loans. In contrast to Asset Backed Securities, covered bond pools exclude non-per- forming loans, which adds yet another layer of comfort. “In addition to elevated credit quality, covered bonds are a type of debt instrument that offer investors an extra level of security due to their dual recourse feature, which means that bondholders have a claim on both the issuer and the underlying assets,” Stille explains. “In fact, there has never been a default in the European covered bond market since its inception over 200 years ago.” In aggregate, this means that covered bonds have a multitude of features that make them attractive low-risk investments. Integrated protection Aside from their intrinsic safety features, European covered bonds are also subject to regulatory protection in the form of the European Union’s
ISSUE 01.2023
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