The Bank of New Zealand said yesterday it had successfully completed its first ever Australian dollar-denominated covered bond issue, raising A$700 million to help strengthen its balance sheet.

The National Australia Bank-owned BNZ said the issue was supported by strong demand from Australian institutional investors, including some overseas investors.

It is the first covered bond to be issued in Australia by a New Zealand or Australasian bank, and it follows BNZ's first offshore covered bond issue completed last year, BNZ treasurer Tim Main said.

Covered bonds have a direct claim on a designated pool of mortgages.