OREANDA-NEWS. Fitch Ratings has assigned Commonwealth Bank of Australia's (CBA, AA-/Stable/F1+) Series 56 EUR1.25bn mortgage covered bonds a rating of 'AAA'. The Outlook is Stable. The fixed-rate bond is due in July 2026 and benefits from a 12-month extendable maturity.

The rating is based on CBA's Long-Term Issuer-Default Rating (IDR) of 'AA-', a discontinuity cap (D-Cap) of 4 notches and the asset percentage (AP) that Fitch relies on in its analysis being the AP used in the asset coverage test (89.5%), which provides more protection than Fitch's 'AAA' breakeven AP of 90.5%. The Outlook on the covered bonds' reflects the Stable Outlook on CBA's IDR.

The 'AAA' breakeven AP of 90.5% corresponding to a breakeven overcollateralisation (OC) of 10.5% is driven by the asset disposal loss component of 11.6%, due to the large maturity mismatches in the programme, with the cover assets having a weighted average life of 15.2 years and the covered bonds' of 5 years, and the impact of the programme's pro-rata asset sales clause, which is used to restrict the sale of assets after an issuer event of default. The credit loss component remained at 3.6%.