Moody's "Short Guide to Covered Bonds"

If you are looking for a concise, up-to-date introduction to covered bonds that is written in plain language and yet speaks with authority and touches all the bases, Moody's "A Short Guide to Covered Bonds" fills the bill admirably.

Chart showing Moody's-rated European covered bond programs, by country, at EOY 2009 (Source: Moody's Investors Service) CLICK IMAGE TO ENLARGEThe headings in this five-page guide provide both a sense of the subject areas addressed and the informal, lucid style:

• Covering the Continent Since 1789: A Default-Free Success Story by Any Name

• What Makes a Bond "Covered"?  - A Quick Course in Dual Recourse

• Benefits to the Covered Bond Investor

• Benefits to the Covered Bond Issuer

• How Covered Bonds Compare to Mortgage Backed Securities

• Covered Bond Risks and Moody's Rating Approach

• Four Main Drivers of a Moody's Covered Bond Rating

• Is the Time Ripe for U.S. Covered Bonds?

The "Short Guide" is geared to people in the U.S. financial community, who may know a lot about securitization and other funding sources but little or nothing about covered bonds.  As Moody's notes, "signs are that a U.S. covered bond market is in the offing."  The final page provides an overview of the push to enact specific covered bond legislation in the U.S.

Not surprisingly, the Guide's discussion of rating methodology is limited to Moody's own approach, but some of the basic considerations are also relevant to the approaches developed by other rating agencies, such as Fitch. 

The "Short Guide to Covered Bonds" was produced by Moody's covered bond rating team, comprised of Juan-Pablo Soriano (Managing Director), Massimo Catizone (Vice President, Senior Credit Officer) and Yehudah Forster (Vice President, Senior Analyst).  The rating agency has decided to "unlock" the document so that it can be accessed without a paid subscription.

To download a PDF of "A Short Guide to Covered Bonds" from Moody's website, first log in (free) at www.moodys.com, then paste the following link into your browser:

http://v3.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF203787