Portugal

The covered bond market is hoping a national champion will soon bring the first Portuguese deal of the year, following the sovereign’s successful bond auction on Tuesday. Elsewhere, Spain’s La Caixa mandated banks for its deal and LBBW is in the market with a dollar benchmark. Meanwhile, the pricing of two German deals on Tuesday went as smoothly as anticipated.

The primary market has slowed to a standstill today, though transactions are in the pipeline and could be due this week — including some new names. In the secondary market, the peripheral sovereign sector has softened but the bid for peripheral covered bonds continues to look well placed.

Moody’s expects negative rating actions on covered bonds to substantially outnumber any positive actions in the year ahead, due principally to weakness in the sovereign and banking sectors.

Fitch today (Thursday) downgraded public sector covered bonds issued by Portugal’s Caixa Geral de Depósitos from AA+ to AA, because the refinancing costs for public sector cover assets are likely to rise in Portugal, based on a review of the sector that it is currently undertaking.

Moody’s on Friday placed on review for possible downgrade covered bonds issued by five Portuguese issuers after placing the issuers’ ratings on negative review the day before.

Moody’s placed Portugal’s covered bond issuers on review for possible downgrade yesterday (Thursday) because of their high reliance on central bank liquidity, the potential impact of planned austerity measures by the Portuguese government, and a more uncertain operating environment.

Standard & Poor’s today (Friday) placed five Portuguese covered bond issuers on negative review after it on Tuesday took the same rating action on the Portuguese sovereign [amended].

Fitch affirmed mortgage backed covered bonds issued by Caixa Económica Montepio Geral at AA yesterday (Thursday) after increasing the programme’s Discontinuity Factor following a review of the legal and regulatory framework for Portuguese covered bonds.

Fitch placed AAA rated mortgage covered bonds issued by Banco Espírito Santo, Millenium BCP, and Banco BPI on negative review yesterday (Tuesday), following a downgrade of the banks’ ratings the previous day.

Fitch will in the coming weeks reassess Discontinuity Factors assigned to Portuguese covered bond programmes after a review of its analysis of the country’s covered bond framework revealed that the latter leaves “some residual exposure” to an issuing financial institution, the rating agency said yesterday (Wednesday).

Fitch downgraded mortgage backed covered bonds issued by Caixa Económica Montepio Geral from AAA to AA, on negative review, yesterday (Tuesday), because of new asset analysis assumptions for Portuguese mortgages.

Fitch downgraded Caixa Económica Montepio Geral from A- to BBB+ , on Rating Watch Negative, yesterday (Thursday), because the Portuguese bank is facing increasing difficulty in defending its asset quality and maintaining operating profitability amid low interest rates and limited prospects for economic growth in Portugal.