Momentum for NZ covered bonds accelerating 31 May 2010 4:42PM Philip Bayley In New Zealand, NZF HomeLoans Ltd last week launched its first RMBS issue via MZF Mortgages 2010-1 Trust. The NZ$100 million RMBS issue will comprise four tranches: NZ$87.8 million of 'AAA' rated Class A1 notes; NZ$9.1 million of 'AAA' rated Class A2 notes; NZ$2.5 million of 'AA-' rated Class B notes; and NZ$0.6 million of unrated Class C notes. The issue is expected to price next week.KangaNews reported two small bond issues by New Zealand councils. Hamilton City Council (AA-) priced NZ$25 million of two-year FRNs at 78 bps over bank bills and Christchurch City Holdings (AA+) priced NZ$30 million of five-year FRNs at 95 bps over bank bills. There was more news on the establishment of a New Zealand covered bond market, with reports that the major banks are rapidly gearing up to issue as much as NZ$16 billion of covered bonds. The RBNZ has reportedly told the major banks that issuing covered bonds, equivalent to no more than five per cent of their total funding requirement, would not cause concern. Bank of New Zealand, a NAB subsidiary, is considered to be the likely forerunner of any covered bond issuance.