Fitch Ratings this morning confirmed the higher ratings available to Australian banks through covered bonds when it rated NAB's first covered bond issue as "an expected 'AAA(exp)'".The NAB bonds are the first under a program which will allow NAB to issue up to US$20 billion of bonds secured against a dynamic pools of Australian mortgages.Fitch said the rating was based on a combination of NAB's existing AA rating and a "Discontinuity Factor" or D-factor of 24.9 per cent.The D-factor is Fitch's measure of the likelihood that payments on the covered bonds will be interrupted at the time of a default by their issuer. The NAB offering's D-factor reflected the "strength of the asset segregation" through a special-purpose vehicle, the issue's "mitigant to liquidity gap risk", the provision for the guarantor to take decisions after issuer default, and regulatory oversight under Australia's new covered bond legislation.In a statement, Fitch director David Carroll said "that the launch of the NAB's covered bond program "sees the commencement of what is expected to be an active source of additional funding for Australia's major banks".