Covered Bonds

The level of support banks can expect from their owners or governments was key to rating actions made by Fitch and Standard & Poor’s in the past 24 hours, as rating actions continued on covered bond-issuing members of groups that have been at the centre of the past fortnight’s emergency rescue packages.

Moody’s on Friday put the Aaa ratings of Dexia Sabadell’s cédulas territoriales on review for possible downgrade after cutting the bank’s long term rating from Aa2 to A2 and putting this on review for possible downgrade.

Moody’s on Friday put its A1 rating of Bradford & Bingley’s covered bonds on review for upgrade, but cited a possible upgrade to the bank’s senior unsecured rating as the reason for this rather than the UK government guarantee the covered bonds enjoy.

Standard & Poor’s has affirmed its AAA rating of Achmea Hypotheekbank’s covered bond programme, which was recently revealed to have had failed its asset cover test five times in the past year and had ineligible loans in its cover pool.

Moody’s, Standard & Poor’s and Fitch yesterday (Tuesday) took rating actions on the covered bonds issued by Hypo Real Estate group entities following its bailout with a Eu35bn credit facility from the German government and banking industry on Monday. [Updated to correct existing Moody's ratings.]

“Excessive” issuance of covered bonds can put downward pressure on a financial institution’s ratings, according to a Fitch report published this Wednesday on the relationship between covered bond issuance and their institutional ratings. However, the rating agency said that existing issuers still had plenty of issuance headroom.

We should have realised that there was something unreal about the Paris drinks last week the moment we saw that there was no rollercoaster ride but plenty of liquidity on offer. We had thought that the Hypo Real Estate gossip was nothing more than the champagne doing the talking, but the e-mails below reveal we were as wrong to ignore the warnings of impending disaster as the captain of the Titanic.

Spanish banks will be resilient to the global financial crisis, but the country’s economy faces painful adjustment. That was the message from speakers at Euromoney’s Spain in the Capital Markets conference in Madrid on Tuesday, where the fate of the country’s savings banks and their covered bonds also proved controversial.