Covered bonds could hurt the U.S. housing finance market during times of stress, according to Moody’s Investors Service. Commenting on legislation introduced to create a framework for a covered-bond market, Moody’s did acknowledge, however, that the bonds have proved to be successful mechanism in countries that have frameworks for them, but in the U.S., “the housing finance market may not function as well during periods of stress if greater reliance is placed on the covered-bond market versus the FHLBanks.”
