OREANDA-NEWS. Issuance volume in 2015 for Canadian covered bonds (CvB) collateralized with residential mortgages has already surpassed all prior years' volume, according to Fitch Ratings.

Driven by interest rates near historical lows and strong investor demand for high quality assets, Canadian banks have issued over 31 billion Canadian dollar (CAD) equivalent year to date. In addition, they have been able to take advantage of the global market volatility experienced this year to diversify their funding for residential mortgages.

Canadian banks typically rely on demand deposits as a primary source of funding for residential mortgage assets, and issue covered bonds opportunistically when funding costs are attractive. Covered bonds are corporate debt secured with a segregated pool of residential mortgage loans. Covered bond programs began in Canada in 2007.

CvBs are typically issued in various currencies reflecting the global investor base. Year to date, approximately 60% of issuance has been in EUR and GBP, approximately 25% in US\\$, with CAD and AUD making up the remaining amount. Most bonds are issued in three- and five-year maturities, which accounted for roughly 30% and 55% of issuance to date. Seven-year maturities accounted for approximately 12%.

Issuance volume may remain active through the end of the year and will continue to be driven by market conditions. Fitch does not expect CvB issuers to be constrained by the issuance limits of their existing CvB programs as Fitch estimates approximately 62 billion CAD of new debt can be issued under existing programs.