Asia Pacific covered bond issuers comprise high-quality financial institutions that can support the credit quality of their covered bonds through coronavirus-related economic disruptions, said Moody’s recently.
"The strong and stable credit quality of covered bond issuers in Australia, Japan, Korea, New Zealand and Singapore will support the credit quality of covered bonds in these Asia Pacific countries,” said Joe Wong, a Moody's Vice President and Senior Analyst.
In addiiton, Asia Pacific cover pool assets consist of high-quality residential mortgages and residential mortgage-backed securities (RMBS), Wong noted.
In Australia, the coronavirus resurgence since July poses risks for residential mortgages in cover pools, Moody’s pointed out.
However, the economy improved quickly after earlier waves of the pandemic in 2020. Government support and low interest rates also mitigate risks for cover pool mortgages, the firm added.
Meanwhile, coronavirus cases in New Zealand were low as of early September, which is positive for the credit quality of cover pool mortgages, the credit rating firm said.
Elsewhere, in Japan, cover pools primarily consist of Aaa (sf)-rated RMBS, according to Moody’s, adding that government support, low unemployment and low interest rates mitigate risks for mortgages amid rising coronavirus cases.
In Korea, too, government support and low interest rates mitigate risks from the resurgence of coronavirus cases, said the firm.
The Korean economy had improved quickly after earlier rounds of coronavirus disruptions, the firm added.