Greece

Moody’s placed Société Générale (Aa2), Crédit Agricole (Aa1) and BNP Paribas (Aa2) on review for possible downgrade on Wednesday, because of their exposure to the Greek private sector and government debt, and a potential inconsistency between the impact of a possible Greek default or restructuring and the banks’ higher rating levels.

Standard and Poor’s downgraded four Greek covered bond issuers from B to CCC, and removed them from credit watch negative on Wednesday, because of increased risk to their financial profiles.

Standard & Poor's lowered the sovereign rating of Greece from B to CCC on Monday, and removed it from credit watch negative, though the outlook remains negative. The rating agency believes the cut could have a negative effect on four Greek covered bond issuers.

Fitch has downgraded covered bonds issued by Marfin Popular Bank from BBB+ to BBB and kept them on rating watch negative, following a downgrade of the issuer’s default rating on June 1.

The covered bond primary market exploded into life on Tuesday with new developments on as many as eight deals — of which four or even five, are expected to price during the day. The constructive primary market is largely due to an improvement in underlying market sentiment.

The eurozone sovereign debt crisis has tested the covered bond product like never before. Katie Llanos-Small examines how covered bonds from the periphery have performed during the crisis, and asks what might happen if a eurozone sovereign were to default.

The possibility of a covered bond issuer pricing a deal inside government debt, once considered highly improbable, is now conceivable, say Deutsche Bank and Barclays Capital.

Moody’s took rating action on the covered bonds of three issuers on Monday, downgrading the deals issued by Santander Totta, and Caxia Geral de Depósitos, while placing those issued by Marfin Popular Bank on negative review.

A new world order in debt markets could soon be ushered in with the first covered bond new issue to be priced through domestic government bonds, investors and bankers were forecasting this week.

Amid growing concern over peripheral euro sovereigns, covered bond analysts are focusing on the exposure to the troubled periphery of public sector cover pools in core jurisdictions.

Primary market activity was confined to a lone mandate from Dexia Municipal Agency on Monday, though issuers across core Europe are watching the market closely, said syndicate officials.

All Portuguese benchmark deals now trade inside government bonds.