In a comment on BNZ's new covered bond program, Moody's Investors Service advised that covered bonds generally enhance banks' ratings by increasing diversification of funding sources, enabling leverage of offshore covered bond markets and providing access to funding with longer maturities. At the scale of BNZ's proposed issuance, this development is a credit positive. If issuance were to become a more significant portion of total funding, credit negative elements such as structural subordination and dilution of asset quality could offset the benefits of increased funding diversification. Moody's notes the RBNZ has included covered bonds in its new liquidity policy, classifying them with RMBS as primary liquid assets. Such a classification makes covered bonds an attractive instrument for New Zealand banks to both issue and hold, particularly if they improve an individual bank's liquidity coverage ratio under the new Basel proposals. RBNZ has yet to confirm if covered bonds will be repo-eligible for open market operations.Standard & Poor's advised that it had received a number of enquiries since the announcement of the BNZ program.