Covered bonds have long been marketed as a 'rates' rather than a 'credit' product. It's a distinction that issuers and investors alike have historically taken at face value. But, as with so much of the market's received wisdom, the events of last summer have forced a reconsideration. Firstly, what does this distinction actually mean?
On the broadest level there is a consensus that a rates product is a (credit) risk-free, fixed rate bond with high levels of liquidity that can be traded as a proxy