Are covered bonds different from securitization bonds? A comparative analysis of credit spreads

• Autor(a) principal: Correia, Mafalda C.
• Data de Publicação: 2023
• Outros Autores: Pinto, João M.
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/37992
• topic: Credit spreads; Securitization; Covered bonds; Mispricing; Cost of borrowing

This study compares credit spreads and pricing determinants of securitization vis-à-vis covered bonds. Our analysis reveals that although ratings are the most important pricing determinant for asset-backed securities (ABS) and mortgage-backed securities (MBS) investors place relatively more importance on contractual, macroeconomic and banks' characteristics rather than ratings in pricing covered bonds. We find evidence of a mispricing effect in structured finance markets: ABS and MBS have higher credit spreads than similarly rated public-covered bonds and mortgage-covered bonds and security prices reflect information beyond credit ratings. We find no evidence of borrowing costs affecting banks' choice between securitization and covered bonds.