15 June 2012 7:01am

Fixed-income fund managers would welcome the entry of lower-rated issuers into the covered bond market, although they fear small issuers would be hard-pressed to meet their liquidity requirements.

Delegates at yesterday’s Euromoney covered bond forum in Sydney focused on the role non-AAA issuers might play in the development of the Australian covered bond market.

So far, the Big Four banks and Suncorp have issued about A$30 billion of covered bonds – all of it rated AAA. These issuers' total issuance capacity is $120 billion to $130 billion (given they may use this form of...