Spain

EuroWeek cartoonist Olly Copplestone’s take on this week’s Spanish exhibit.

A Eu1.45bn five year AyT Cédulas Cajas issue confounded sceptics by becoming the first multi-cédulas benchmark to have been successfully placed since November 2007 yesterday (Tuesday). One market participant even went so far as to describe it as marking a return to business as usual – albeit at wider levels.

The fate of a new AyT Cédulas Cajas issue hung in the balance today (Monday) as market participants discussed whether or not it was possible at the levels being sounded.

Several covered bond issuers are understood to be circling the market, hoping to pick off tighter levels. However, some are encountering resistance from investors, even if the European Central Bank’s purchase programme continues to underpin the market.

Ahorro Corporación Financiera is said to be preparing an AyT Cédulas Cajas issue for launch next week that could be the biggest test of the covered bond market since the European Central Bank’s Eu60bn purchase programme was announced.

Further new issuance is on the cards for this week, despite the beginning of the European summer holiday season starting to have an impact on the pace of supply. Meanwhile, the European Central Bank has reported a further Eu43m of purchases under its programme and president Jean-Claude Trichet gave the asset class another ringing endorsement.

Standard & Poor’s placed Banco Popular Español’s cédulas hipotecarias on negative review on Friday because of “significant” cashflow gaps.

Fitch said today (Friday) that recent Spanish legislative changes have improved the country’s covered bond framework and that it will amend the Discontinuity Factors it assigns cédulas hipotecarias.

Moody's yesterday (Wednesday) confirmed the Aaa ratings of six cédulas hipotecarias programmes.

Moody’s yesterday (Tuesday) downgraded two cédulas hipotecarias and two cédulas territoriales programmes, and affirmed the Aaa ratings of three cédulas territoriales programmes. Seven other cédulas programmes and 59 series of multi-cédulas remain on review for possible downgrade.

Moody’s yesterday (Monday) cut the ratings of 25 Spanish banks, heightening the risk of downgrades to certain cédulas. However, the ratings of jumbo cédulas issued by individual banks appear safe.

The deal pipeline for next week appears surprisingly thin, said syndicate officials today (Friday), but one covered bond banker suggested that it was only deceptively so.