Moody's Investors Service says that New Zealand covered bond programmes continued their stable performance during Q4 2014 supported by the stable Aaa rating of the New Zealand sovereign, the stable financial profiles of the issuers all rated Aa3 with a stable outlook and the high credit quality of the cover pool assets.
The high credit quality of the cover pool assets was reflected in the decrease of the average collateral score to 6.8% in Q4 2014 from 8.2% in Q3 2014 driven by (1) our revised MILAN methodology published on 20 January 2015, which adjusted the penalties for regional concentration based on historical experience; (2) our recent update on the NZ property price index and (3) cover pool improvements. The weighted average current loan-to-value ratio of the residential mortgage loans in the cover pools ranged between 45.9% and 57.1%, compared to a range of 47.1% and 56.9% in Q3 2014.
The programmes' average minimum over-collateralization (OC) commensurate with Aaa decreased to 15.3% in Q4 2014 from 16.6% in Q3 2014. At the same time, New Zealand issuers' committed OC levels increased to 18.3% in Q4 2014 from 18.0% in Q3 2014.
Total covered bond issuance remained unchanged in Q4 2014 at NZD14.4 billion. As at end-Q4 2014, the majority of covered bonds was issued in EUR (67.8%), followed by NZD (15.0%).
