PT  - JOURNAL ARTICLE
AU  - Karan Bhanot
AU  - Carl F. Larsson
TI  - The Dollar Denominated Covered Bond Market: <em>A Cross-Country Analysis of Credit Spreads</em>
AID  - 10.3905/jfi.2019.29.2.026
DP  - 2019 Sep 30
TA  - The Journal of Fixed Income
PG  - 26--43
VI  - 29
IP  - 2
4099  - https://pm-research.com/content/29/2/26.short
4100  - https://pm-research.com/content/29/2/26.full
AB  - The authors analyze the determinants of credit spreads of 674 US dollar denominated covered bonds, issued by institutions domiciled in twenty-one countries, over the sample period 1/2001 to 1/2016. Even though covered bond contracts include strong credit enhancements, there is considerable heterogeneity in observed credit spreads through time and in the cross-section. The authors find that measures of sovereign risk and country specific legal frameworks are among the most important explanatory factors for differences in spreads across these bonds.TOPICS: Project finance, statistical methods, credit risk managementKey Findings• The authors study the determinants of US dollar denominated covered bond credit spreads for bonds issued in twenty-one countries during the period 1/2001 to 1/2016.• Despite carrying strong credit enhancement features, US dollar denominated covered bonds still exhibit variation in spreads both through time and in the cross-section of issuer country of domicile.• Empirical results suggest sovereign risk and country-level legal frameworks are important determinants of US dollar denominated covered bond credit spreads.