OREANDA-NEWS. Fitch expects Australian covered bond issuance to drop to between AUD15bn and AUD17bn in 2015, down from AUD18.5bn in 2014. The fall in issuance will largely be attributable to a move in bank funding strategies to favour other sources over covered bonds. The fall will be further exacerbated when looking at US dollar issuance due to the 14% depreciation of the Australian dollar against the US dollar over the past 12 months. These findings are discussed in Fitch's "Covered Bonds Quarterly Report - 4Q14".

New Zealand saw a total of NZD1.2bn in issuance in 2014, with no issuance in the last quarter. Fitch believes New Zealand's 2015 issuance will remain on par with 2014, totalling between NZD1bn and NZD2bn.

Australia issued AUD3.98bn in the fourth quarter of 2014, almost double total issuance of the previous quarter. Included in the issuance was the first refinancing of a covered bond in Australia since the market opened in 2011. This trend will continue in 2015 where refinancing for the Australian covered bond market will equate to approximately AUD5.81bn across the four major banks. New Zealand covered bond refinancing needs equate to approximately NZD1.7bn. However, these maturing amounts are not expected to necessarily be refinanced in full with additional covered bond issuance.

The report also summarises the results from Fitch's recent Covered Bonds Investor Survey Year-End 2014, which highlights investors' concerns about falling secondary market liquidity and their preferences for covered bond holdings in 2015.

The credit quality and composition of the cover pools remained stable across Australia and New Zealand during the quarter. ANZ increased its cover pool by AUD2.27bn, NAB topped theirs up by AUD3.125bn, and ANZ Bank New Zealand Limited's (ANZNZ, AA-/Stable/F1+) cover pool increased by approximately NZD500m.

Data reported in the "APAC Covered Bonds Quarterly - 4Q14", is at December 2014.