Covered bond issuance and the implications for bank ratings

Since the authorisation of Pfandbrief issuance by Frederick II of Prussia in 1769, covered bonds have grown to become one of the largest asset classes in the European bond market, with outstanding issuance exceeding 1.9 trillion euros in 2007. They now constitute a major source of funding for mortgage finance. Although initially dominated by the German domestic Pfandbrief, the covered bond market has seen significant geographical expansion and diversification of issuance patterns, centred …