Australia covered bond innovation analysed

Author: Ashley Lee | Published: 5 Sep 2013
  • Australian covered bond issuance has slowed this year as residential mortgage-backed securities (RMBS) pricing has become more favourable;
  • The market has seen developments in covered bond structures, tenors and currencies since the first issuances in late 2011;
  • But given most potential issuers have already established covered bond programmes, the lack of new issuers could slow innovation in this space.

Although Australian covered bond issuances slowed this year, investors are demanding increasing innovation, as they become more comfortable with the product.

As other Asia-Pacific jurisdictions focus on strengthening their nascent capital markets, Australia’s sophisticated financial markets are introducing new structures into the region. For example, Australia was only the second country in Asia – after New Zealand – to enact a law enabling covered bond structures.

But since covered bonds...