Norges Bank’s Nicolaisen: covered bonds can create distortions
Covered bonds could have unintended consequences, deputy warns
Norges Bank deputy governor Jon Nicolaisen flagged some of the downsides of the popularity of covered bonds in a speech today (April 6).
The bonds, backed by collateral in the form of mortgage lending, are typically treated as almost as safe as triple-A sovereign debt, he noted. Their history of stability supports this diagnosis, but investors could still be tripped up if a major shock to house prices impacts the mortgage market, he warned.
Furthermore, covered bonds interact with regulations
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