In a polling of 53 covered-bond investors, Fitch Ratings found appetite strongest for deals from the younger markets of Canada and Australia.

This could be partly a reflection of the geographic make-up of the respondents. Nearly a fifth of them were located outside Europe, up from 5% in the same survey last year.

See below for a summary of how investors plan to re-allocate their covered bond portfolios this year across geographies.

Investors are also attracted to the high yields in the peripheral Eurozone countries. Some 88% plan to either increase or maintain their holdings from Ireland, Italy, Portugal and Spain, outnumbering those seeking to cut their peripheral exposure.

Those surveyed saw the most serious challenges stemming from sovereign risk, the health of the banking sector and regulatory treatment.

In terms of ratings, 42% of respondents are allowed to invest in paper as low as triple-B, while 10% are confined to triple-A product.

Among the investors polled, 16% manage more than €20 billion ($27 billion) of covered bonds, 22% between €5 billion and €20 billion; and 62% less than €5 billion.

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