Peripheral covered cuts may alter ECB repo criteria

The covered bonds of Portuguese and Irish banks are drawing ever closer to sub investment grade status, though they are likely safe for the summer. Moody’s on Tuesday cut Ireland from Baa3 to Ba1 and assigned a Timely Payment Indicator (TPI) of Very Improbable to all Portuguese mortgage backed covered bonds. Some banks are rated only by Moody’s, though should the sub investment rating Rubicon be crossed, analysts expect the ECB to alter its criteria for repo eligible collateral.