DBRS Limited (DBRS Morningstar) released the Monthly Canadian Covered Bond Report, which provides an overview of the Canadian covered bond market for the month ended June 30, 2020, along with detailed information on this debt market.

Total outstanding covered bonds grew to $273.2 billion (Canadian-dollar equivalent) in June 2020, up from $265.3 billion the prior month. During June 2020, the market saw two new issuances, both from the from the Royal Bank of Canada (rated AA (high) with a Stable trend by DBRS Morningstar) totalling $10.0 billion. There were two maturities with a combined total of $2.0 billion during the same period, one each from the Canadian Imperial Bank of Commerce (rated AA with a Stable trend by DBRS Morningstar) and the Toronto-Dominion Bank (rated AA (high) with a Stable trend by DBRS Morningstar). Net growth in the covered bond market reached $107.8 billion year to date.

Canadian dollar-denominated covered bonds climbed to make up the largest part of the covered bond market, driven primarily by the $10.0 billion issuance in local currency in June 2020, representing 36.3% of total covered bonds outstanding, followed by euro-denominated covered bonds at 34.6%, and U.S. dollar-denominated covered bonds at 17.2%.

Office of the Superintendent of Financial Institutions and Autorite de marches financiers covered bonds ratios, which represent the total assets pledged for covered bonds (related to market issuance) to the total on balance sheet assets, ranged between 2.17% to 3.41% (below their 5.5% limits). The covered bond ratio limits were temporarily increased to 10% to enable an issuer's additional own-name issuance for the purpose of accessing the Bank of Canada's repurchase facilities. The temporary covered bond ratios ranged from 3.10% to 5.23%, below the 10% limits.

Overall, the cover pools have experienced stable performance with delinquencies in age buckets relatively in line with their historical trends. Given a surge in the unemployment rate, benign delinquencies could be attributed to measures implemented by the federal government to relieve the financial burden on obligors, such as the Canada Emergency Response Benefit, as well as payment relief programs offered by lenders.

Notes:

All figures are in Canadian dollars unless otherwise noted.

The report is available at www.dbrsmorningstar.com.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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