Austria

Moody’s yesterday (Tuesday) downgraded Kommunalkredit Austria’s long term senior rating from Aa3 to Baa1, on stable outlook, citing the bank’s impaired franchise and longer term uncertainty about its future as a standalone viable entity.

Covered bonds made a comeback in the Swiss franc market this week, as investors reached for a highly rated asset class that, unlike other triple-A product, still offers a spread above mid-swaps.

Moody’s will conclude its review of Kommunalkredit Austria’s ratings within the coming weeks on the basis of the banking group’s existing structure and profile without, as originally planned, taking into account comments from the European Commission on the bank’s restructuring plan.

Bank Austria has for the first time obtained a rating of its Pfandbriefe. Moody’s yesterday (Tuesday) assigned a definitive Aaa rating to the issuer’s public sector Pfandbriefe.

Moody’s yesterday (Monday) said that the risk that covered bondholders in Austria and Germany could be deprived of their priority right over any assets located outside the European Economic Area needs to be addressed by issuers.

Hypo Alpe-Adria is understood to be willing to structurally enhance its covered bond programme to preserve its Aaa rating, said Moody’s yesterday (Thursday).

Erste Group Bank yesterday (Wednesday) priced its debut jumbo Pfandbrief, which is also the first Austrian benchmark to be backed by mortgages and the first to be sold under the country’s mortgage bank law.

Erste Group Bank is in the market today (Wednesday) with a Eu1bn seven year mortgage Pfandbrief. Barclays Capital, Commerzbank, and Erste Group Bank have set guidance at 115bp-120bp over mid-swaps.

Standard & Poor’s yesterday (Tuesday) downgraded Hypo Investmentbank’s rating from A+ to A.

After a long break from issuing Pfandbriefe, Austrian bank Hypo Vorarlberg is making moves to return to what was a traditional funding source for the bank.

Austria’s Hypo Investmentbank launched its first public sector Pfandbrief issue last Thursday, a Eu120m deal, a day after Moody’s assigned a Aaa rating to its covered bond programme.

Dexia Crédit Local today (Tuesday) found its second visit to the government-guaranteed market easier than its first and is set to price its new issue this afternoon. Meanwhile Lloyds TSB found demand from unexpected areas in sterling and OeVAG wrapped up its four year euro.