Austria

The government guaranteed bank debt market was the juncture of two waves of negative sentiment in the markets this week, as downgrades hit the sovereign market and financial institutions suffered renewed pressure.

Erste Bank will this (Friday) afternoon price the first Austrian guaranteed bank deal, two days after agreeing a debt issuance programme with the country’s Finance Ministry. Meanwhile a new, unique government-backed name could emerge next week.

Rating action: Moody’s yesterday (Thursday) placed on review for possible downgrade the long term debt rating of Austria’s Erste Group Bank (Aa3).

Moody’s yesterday (Wednesday) placed on review for possible downgrade the public sector covered bonds of Hypo Alpe Adria International (HAAI) that do not benefit from a grandfathered guarantee from the State of Carinthia.

Although the government guaranteed bank bond sector is maturing in the UK, the impact of broader issuance on the rest of the fixed income market has yet to fully play out, with the sovereign, supranational and agency sector throwing up new pricing surprises and some countries just beginning to gear up for issuance. Another shocking level appeared on screens only this (Monday) morning.

Moody’s yesterday (Thursday) placed on review for downgrade the Aaa rating of Kommunalkredit Austria’s public sector covered bonds, three days after the Austrian government nationalised the bank.

The Austrian government yesterday (Monday) nationalised Kommunalkredit Austria, acquiring Dexia’s and VBAG’s stakes in the public sector lender, which is the country’s biggest issuer in the international covered bond market.

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.

Hypo Investmentbank is eyeing a Eu1bn maximum deal at the short end of the curve for its inaugural jumbo Austrian Pfandbrief, the bank’s head of funding told The Cover ahead of its roadshow later this month.

Hypo Investmentbank AG yesterday (Thursday) mandated Barclays Capital, BNP Paribas and Dresdner Kleinwort to launch the Austrian bank’s inaugural jumbo public sector Pfandbrief.

*Excludes German, French, Spanish and Nordic issuance.

Kommunalkredit Austria priced a Eu1bn four year covered bond at mid-swaps flat this morning, as expected, but while the transaction shows how the most sought after names can avoid the worst of the spread widening, questions remain over what whether anything can be printed any tighter.