Although covered bonds have been in existence for centuries, the issuance has grown considerably since the mid 1990s. In the middle of 2007, the outstanding amount of covered bonds was at least 1.7 trillion Euros. In the post credit crisis, US Treasury Secretary Henry Paulson issued the Treasury’s plan to promote covered bonds. This has spearheaded a new era of mortgage financing with the United States, the world’s largest mortgage market leading the world in the use of Covered Bonds.
Recently, countries outside of US and Europe kick started its covered bond programme including New Zealand and Korea. Asian regulators in Singapore and Hong Kong have also stepped up efforts in promoting Covered Bonds.
Covered Bonds have been touted as the market’s answer to the post credit crisis. For the investor, Covered Bonds are an attractive asset class offering high credit quality, attractive yields, diversification and protection against event risk. For the issuer, Covered Bonds attract higher credit ratings, lower the cost of funding and diversify refinancing sources.
After a 4 year absence since the credit crisis, Asia’s greatest event for the fixed income and securitisation industry returns with much anticipation from Asian market players – to bring back the much needed roar and optimism in Asia’s financial markets.