In assigning the rating to the major bank’s Series 2016-2 bonds, Moody’s said the credit quality of the assets backing the covered bonds was a major factor.
“The covered bonds are backed by Australian residential mortgage loans. The collateral score for the cover pool is 4.80 per cent,” it said.
The ratings agency said the legal framework of ANZ’s bond program, as well as the cover pool’s exposure to market risk – which is 16.36 per cent – were also considered.
“As at 1 February 2016, the total value of residential mortgage loans included in the cover pool is [$21.9 billion]. The residential mortgage loans have a weighted-average (WA) seasoning of 29.7 months and a WA current unindexed loan-to-value ratio of 66.1 per cent,” Moody’s said.
Furthermore, Moody’s said its rating addresses the expected loss posed to investors, which is 19.6 per cent for the cover pool.
“Moody’s splits cover pool losses between market risk of 16.36 per cent and collateral risk of 3.22 per cent,” it said.
“Market risk measures losses stemming from refinancing risk and risks related to interest-rate and currency mismatches (these losses may also include certain legal risks). Collateral risk measures losses resulting directly from cover pool assets’ credit quality. Moody’s derives collateral risk from the collateral score, which for this program, is currently 4.80 per cent.”
[Related: CBA receives AAA rating for mortgage bonds]