Tradeweb Introduces Mortgage-Backed ‘Covered’ Bonds

Tradweb, an over-the-counter multi-asset class online marketplace owned jointly by Thomson Reuters and 10 global dealers, said the online covered bond marketplace in the U.S. will enable institutional clients to access the same level of price transparency that can be found on Tradeweb’s other marketplaces, as well as the ability to electronically execute and process trades.

Covered bonds are debt securities backed by cash flows from mortgages or other loans. The assets remain on the issuer’s consolidated balance sheet and investors have recourse to a pool of assets that secures or “covers” the bond if the originator becomes insolvent, a release explained.

Tradeweb said covered bonds enable mortgage providers to enhance their liquidity and funding positions. The market provides an effective means of funding diversification, as well as the opportunity to reduce the cost of funding through the issuance of higher-rated covered bonds.

The company said the decision to provide the new marketplace was made at the encouragement of the U.S. Treasury, as well as Tradeweb’s dealers and institutional clients.