Standard & Poor’s says the Canadian mortgage-backed securities market has broken the $10-billion issuance barrier, signaling that this is a viable, liquid market.

S&P reports that in the first five months of 2004, the Canadian MBS market has had three deals close for a total public issuance of about $1.2 billion, bringing the total amount issued since inception to more than $10.1 billion. S&P says that by breaking $10 billion in issuance, “Canada has securely established a liquid market with a depth and appetite for MBS.”

“This interest in CMBS is a positive development for investors, as increased issuance is not only an indicator of robust demand, but new certificates also assist the development of secondary-trading opportunities,” S&P said.

The latest round of new issues was highlighted by the biggest deal to date, the $613.9-million Merrill Lynch Financial Assets Inc. 2004-Canada 12 issue. S&P says that it continues the trend of larger deal sizes. “The trend toward larger deal sizes can reduce risks associated with geographic, borrower, and asset class concentrations,” S&P notes.

“The three deals that have closed in 2004 underscore the vibrancy of the MBS market in Canada, which is demonstrated by the diversity of originators, property types, and geographies,” S&P says. “The growth of the Canadian CMBS market is also a positive event for real estate borrowers. The growing MBS market has successfully expanded the financing choices for real estate borrowers, and has therefore emerged as an important source of debt financing to owners of real estate.”

The rating agency argues that growing investor confidence is the driving force behind current and future market growth. “Market acceptance of the MLFA Canada 12 deal further underscores investor confidence, and now that a $10 billion issuance level has been reached, the added liquidity can only serve to further boost investor interest,” it says.