UK

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.

HM Treasury ended the uncertainty over the fate of Bradford & Bingley’s covered bonds yesterday (Monday) afternoon by bringing them under the government guarantee that had already been extended to certain of the bank’s liabilities.

While Santander has stepped in to take on Bradford & Bingley’s branch network and retail deposits, which will be transferred to Abbey National, the UK government has been left holding the bank’s mortgage book and wholesale liabilities. The outlook for its covered bonds is not, however, completely clear.

After launching its first UK covered bond issues backed by UK mortgages, Bank of Ireland told The Cover that, sitting alongside its Irish asset covered securities issuance, the new programme will give it greater funding flexibility.

In brief: Barclays Bank has replaced Bradford & Bingley as interest rate swap provider for B&B’s covered bond programme.

Fitch and Standard & Poor’s yesterday (Tuesday) took negative rating actions on Bradford & Bingley and its covered bonds, citing concerns over the quality of the mortgage lender’s assets and its access to funding. However, signs that the bank is making some progress in dealing with some of its problems have since emerged.

Bank of Ireland has set up a Eu15bn UK mortgage covered bond programme under which it has launched eight series with a volume of £500m each.

Moody’s and Standard & Poor’s yesterday (Thursday) announced further rating actions on Lloyds TSB and HBOS following the announcement that the institutions are planning to merge.

The Bank of England has reversed its hardline stance on the special liquidity scheme and announced that the window will extend another three months until the end of January.

Fitch and Standard & Poor’s have downgraded their ratings of HBOS and Bank of Scotland, its main operating subsidiary. However, developments surrounding the UK bank are moving fast and it now looks set to be taken over.

In brief: Moody's today (Wednesday) downgraded Bradford & Bingley's covered bonds from Aa1 to A1. The bonds remain on review for further downgrade, but Moody's is considering enhancements that B&B is expected to make to its covered bond programme.

Moody’s today (Tuesday) cut Bradford & Bingley’s senior unsecured rating from Baa1 to Baa3, and left it on negative outlook. The action bring closer the expected downgrade of B&B’s covered bonds to single-A.