Covered bond
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Covered bonds are debt securities backed by cashflows from mortgages or public sector loans. They are similar in many ways to asset-backed securities created in securitization but covered bond assets remain on the issuer’s consolidated balance sheet.
Essentially, a Covered Bond is a corporate bond with one important enhancement: recourse to a pool of assets that secures or "covers" the bond if the originator (usually a financial institution) becomes insolvent. This enhancement typically (although not always) results in the bonds being assigned AAA credit ratings.
Common in Germany for many years where they are known as Pfandbriefe and can be traced back to 1769.
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