Austria

UniCredit Bank Austria (UBA) has tripled the share of non-profit housing loans in its mortgage pool in a year and reduced the share of riskier commercial mortgages, in a move which Moody’s said was credit positive for its Aa1 programme.

Austrian covered bonds were steady on Tuesday after a swathe of Moody’s senior downgrades hit covered bonds, leading bankers to say its methodology has serious weaknesses. Separately, Standard & Poor's upgraded €27bn of multi-Cédulas in a move which analysts said would have little impact and could soon be reversed. The fact multi-Cédulas have outperformed Austrian covered bonds all year is due to the other factors.

The Austrian government's decision on winding up Hypo Alpe Adria is a sign of waning state support said Fitch on Friday. The announcement comes as Standard & Poor’s put the ratings of seven Austrian banks on credit watch negative, leading Commerzbank research to suggest selective Austrian covered bonds could soften.

The constructive covered bond constellation of conditions continued on Thursday as UniCredit Bank Austria took advantage of superlative funding conditions demonstrated in Swedbank’s deal on Wednesday to issue its third deal of the year. Despite pricing almost flat to the curve, the deal attracted one of the highest levels of oversubscription of any Austrian covered bond in two years.

Credit sentiment is positive, and it seems unlikely that the European Central Bank would take anything other than an accommodative stance at next week’s policy meeting, but bankers are getting cautious that valuations are becoming overstretched, particularly in those markets which have until now been considered safe havens.

UniCredit Bank Austria issued its second €500m benchmark and the group’s fourth covered bond of the year on Monday. The long five year transaction took advantage of excess demand that was identified in core covered bond deals that priced the previous week, but offered a juicier pick up.

Ratings dominated the covered bond market on Tuesday as several Spanish deals were upgraded, while Austria’s Hypo Alpe-Adria Bank’s covered bonds were downgraded. A number of core issuers are monitoring the market, but are not yet ready to the pay the new issue premiums being demanded.

Bayerishe Landesbank’s covered bonds were unaffected on Friday by news on the wind down of Austria’s Hypo Alpe-Adria (HAA), which it partially owns. However, other Austrian covered bonds widened a few basis points after Austria’s finance Michael Spindelegger warned that unsecured bondholders might need to share in the bank’s losses.

Kommunalkredit Austria appointed joint leads on Tuesday for a public sector backed deal likely to be launched after a roadshow.

Aareal Bank and UniCredit Bank Austria priced successful euro deals in five and 10 year maturities on Monday, while Abbey issued a three year in sterling. All three priced at the tighter end of initial thoughts. However, prospective core borrowers with larger funding needs may need to offer more tempting spreads as the market softened on Monday.

Hypo Noe Gruppe Bank AG is set to issue its first mortgage-backed deal early in 2014 after getting a triple-A rating from Moody’s. It will be collateralised mostly by promoted housing company loans and commercial loans of average quality.

UniCredit Bank Austria returned to the covered bond market for the second time this year to issue the country’s seventh benchmark in euros. Despite pricing with little to no new issue premium the deal attracted good demand from a wide group of investors.