Canada’s structured finance and covered bonds markets are poised for additional growth in 2014, according to Fitch Ratings.
Although issuance levels are not expected to exceed those of the peak years prior to the global financial crisis, Fitch expects activity to be consistent, and in some cases higher than, 2013. And total activity for this year is expected to be comparable to 2012, when $12 billion Canadian was issued.
Issuance of covered bonds, in particular, is expected to pick up next year as banks resume their programs under a new legislative framework. In 2013, just $10 billion Canadian was issued by two banks, CIBC and RBC, but the other banks are expected to return to market in 2014. The new covered bond rules require stricter disclosure and prohibit the use of insured mortgages as collateral. Despite the restrictions, Fitch said that covered bond programs remain an attractive and cost-effective source of funding for banks.
The outlook for issuance of credit card securitization is stable; in the first three quarters of 2013 just $3.1 billion was issued, down from the record $10 billion issued in 2012.