By SIMON CONSTABLE
Is there a path to higher yield and lower risk in the bond market? Apparently there is, if you believe the promises of so-called covered bonds.
These are a type of mortgage security, issued mainly by financial institutions in Europe, that offers fixed-income investors a double layer of protection against default.
Covered bonds differ from typical mortgage-backed securities in the U.S. in that the issuing bank retains ownership of the underlying mortgages. "The fact that it's on [the] balance sheet means that the issuer has skin in the game," says Kristion Mierau, a portfolio manager and covered-bond expert at Pacific Investment Management Co., or Pimco. See original post here.
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