Fitch: Australian Covered Bond Issuance Down 28% YTD

Fitch Ratings says Australian covered bond issuance was down 28% (AUD2bn) when compared to the same period last year but up 33% (AUD1.3bn) from 4Q Zealand ended the quarter with ANZ Bank New Zealand Limited ( AA-/Stable/F1+) issuing a total of NZD1.1bn which is only NZD33m below

New Zealand's total 2014 issuance. 
New Zealand issuance is small and often affected by the issuance from a single program. Fitch expects further issuance from New Zealand in 2015.

The credit quality and composition of the cover pools remained stable across Australia and New Zealand during the quarter. Australia and New Zealand Banking Group (AA-/Stable/F1+) was the only issuer during the quarter to increase its cover pool by adding bn of mortgages.

The data is contained in Fitch's report 'APAC Covered Bonds Quarterly - 1Q15', released today.

In addition, the report includes commentary on the use of privileged derivatives in Australian and New Zealand covered bond programmes, outlining their features and the use of forward starting covered bond swaps to hedge interest and currency risks. 

The report also looks at housing construction and its impact on house prices in Australia. It compares Australian housing completions against Spain and Ireland over a 20 year period, suggesting the ratio between Australian supply and population has remained stable over time. This is a stark contrast to Spain and Ireland which suffered a building boom-and-bust leading into the 2007-2008 financial crises.

During the quarter, Fitch announced a review of programmes with a documented account bank remedial period that was less conservative than the 30 day period expected under its counterparty criteria. 

The agency is currently reviewing the potential impact this will have to Australian and New Zealand programmes' 'Discontinuity Cap' (D-Cap). Where such arrangements remain un-remedied, this may lead to a tightening of the D-Cap assessment and may impact covered bonds ratings. 

For a copy of the report please go to www.fitchratings.com or click on the link above.