The market for Swedish covered bonds and links to financial stability

Date 23/09/2013

Maria Sandström, David Forsman, Johanna Stenkula von Rosen and Johanna Fager Wettergren describe the market for covered bonds and identify the potential risks this market may pose to financial stability. They describe why covered bonds have a high credit rating and their major importance to the funding of the Swedish banks. The risks are mainly due to the maturity mismatch between covered bonds, which have relatively short maturities, and the more long-term mortgages that they fund. This adds to refunding risks in connection with a financial crisis as market efficiency may be undermined.

 

The article is included in this year's second issue of the Sveriges Riksbank Economic Review, which was published on 18 September.