Covered Bond
Also called: Pfandbrief, covered bonds
A covered bond is debt issued by a bank and secured on a ring-fenced pool of mortgages that stays on the bank's balance sheet. Investors have dual recourse: to the bank and to the pool. That structure is why covered bonds, unlike mortgage-backed securities, kept trading through 2008 — the issuer must replace bad loans in the pool, so the incentive to originate carelessly never appears.