Australian and NZ structured finance performance holds up
Australian and New Zealand structured finance transactions remained robust in the last quarter of 2009, according to Fitch Ratings.
The findings were reflected by a total of 28 publicly rated tranches backed by assets in Australia or New Zealand being upgraded during the quarter. In the same period, 116 tranches were affirmed while three publicly rated New Zealand tranches were downgraded.
Australian and New Zealand tranches accounted for most of the upgrades in the Asia Pacific region in the fourth quarter. Among the 28 upgrades, seven were Australian ABS tranches backed by auto loans, 16 were Australian RMBS tranches and five were New Zealand RMBS tranches.
The upgrades have been attributed to increases in credit enhancement levels, sufficient excess spreads to cover losses and stable or improving performance of the underlying portfolios. The three downgrades of publicly rated New Zealand tranches came from two non-conforming RMBS transactions.
At the end of December 2009, over 300 Australian or New Zealand structured finance tranches had stable outlooks and over 90 had negative outlooks, the majority of which were assigned in accordance with Fitch’s assessment of the lenders’ mortgage insurance providers rather than any deteriorating performance of the underlying portfolios.
Commenting on the strong performance of structured products, Leanne Vallelonga, associate director of Fitch Ratings Asia Pacific structured finance team, said: “Australian structured finance transactions continued their strong performance in [the fourth quarter of 2009] due to the underlying assets, structural enhancements and the continued resilience of the Australian economy.”
Vallelonga continued: “Interest rates remained low during this period, even after a further two interest rate increases to the cash rate target in Australia — ending at 3.75 per cent for 2009, and with no change to the official cash rate in New Zealand, which currently stands at 2.50 per cent.”
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