Over the past decade covered bonds, or securities issued by financial institutions that are secured by dedicated collateral, have become one of the largest asset classes in the European bond market and an important source of finance for mortgage lending. The collateral, or “cover pool”, is usually put together so as to obtain the highest possible triple-A credit rating. As a consequence, covered bonds offer an alternative to developed country government securities for bond investors interested in only the most highly rated securities. Drawing on the BIS international debt securities statistics and other data sources, this feature analyses the recent evolution of the covered bond market. Exploring the main issues involved in assessing the risk of covered bonds, the feature also documents significant divergences among the major rating agencies. An examination of the determinants of covered bond prices suggests that, while the nationality of the issuer matters, the related differences are generally small. At the same time, event study analysis of selected cases finds that the valuation of covered bonds in recent years has been rather robust to shocks to both issuer creditworthiness and the value of the underlying collateral. What are covered bonds? The defining feature of covered bonds is the dual nature of protection offered to investors. Covered bonds are issued by financial institutions, mostly banks, 1 The views expressed in this article are those of the authors and do not necessarily reflect those of the BIS. Dual nature of protection.