Fitch rates Australian covered bond legislation

Rating agency Fitch says it considers the draft legislation on mortgage covered bonds circulated by the Australian government ‘a solid first step' to outlining how  these bonds can be issued, especially regarding segregation of the cover assets.

Covered bonds provide an alternative method for institutions such as banks to convert illiquid mortgages into a funding source. The bonds are issued by banks and collateralised by a cover pool of mortgages. This collateral enhances the credit of the