Covered Bonds

Fitch last week took rating actions on several major banks following a review of the capacity of high grade sovereigns to support their largest and most systemically important commercial banks. The agency upgraded two German Pfandbrief issuers, but cut the ratings of four entities in the Dexia group.

Moody's has increased the refinancing margins it uses to assess European covered bonds’ exposure to refinancing risk. However, the rating agency and other market participants expect any ratings impact of the move to be only limited.

Fortis Bank Nederland’s inaugural government-guaranteed transaction this week, a Eu5bn three year deal priced on Tuesday, was deemed a roaring success by market participants.

EBS Building Society issued the first Irish government-guaranteed bank debt in two months yesterday (Wednesday), shortly before Fitch downgraded the sovereign from AAA to AA+ and put the country on negative outlook. The rating agency today (Thursday) cut Allied Irish Banks and Bank of Ireland by one notch.

Caisse de Refinancement de l’Habitat increased the Eu1bn 10 year issue it launched in late March by more than expected yesterday (Wednesday) afternoon to accommodate demand from end investors.

Moody's yesterday (Wednesday) downgraded three Hungarian covered bond programmes.

Landesbank Baden-Württemberg yesterday (Tuesday) tapped its Eu1bn February 2014 Pfandbrief, and Caisse de Refinancement de l’Habitat is today (Wednesday) also taking advantage of a “perfect week” to increase the 10 year Eu1bn issue it priced on 25 March.

Moody's expects the Irish banking sector to be affected by higher credit losses on loan portfolios than previously anticipated, and yesterday (Tuesday) took multiple rating actions on 12 Irish banks to reflect this. However, an agency to buy bad loans that the Irish government plans to set up will benefit certain banks.

Moody's yesterday (Tuesday) downgraded the mortgage covered bonds issued by Mortgage & Land Bank of Latvia.

Germany’s federal council, the Bundesrat, on Friday approved an amendment to the Financial Markets Stabilisation Law that modifies the German bank guarantee scheme to allow for guarantees of bank debt in maturities out to five years. However, the extension is accompanied by conditions that could limit supply of longer dated government-backed debt, which had been expected to squeeze Pfandbrief issuance.

Moody's yesterday (Monday) placed on review for possible downgrade the ratings of all five Portuguese covered bond issuers, and downgraded the parent of one.