Portugal

Caixa Geral de Depósitos yesterday (Thursday) priced its debut obrigações sobre o sector público, a Eu1bn five year benchmark that achieved strong pricing inside levels initially communicated to investors. Meanwhile Crédit Agricole sized a five year issue at Eu1.25bn yesterday afternoon.

Caixa Geral de Depósitos will this (Thursday) afternoon price its debut public sector covered bond, a Eu1bn five year deal, after Banco BPI reopened the Portuguese sector yesterday (Wednesday). In a reflection of how rapidly spreads are tightening in the market, the deal was launched this morning with guidance set around 10bp tighter than a level syndicate officials had discussed at the beginning of the week.

Banco BPI has closed books on a Eu1bn three year issue as the busy primary market shows no signs of slowing down. Several other candidates are in the wings waiting to tap into the strong demand, although there are signs that investors are not buying just anything they are being shown.

Fitch yesterday (Tuesday) published the new criteria it will use to assess liquidity risks in covered bonds, completing a review process that was announced to the market in March. The final criteria are unchanged in most respects from the rating agency’s initial proposal, but Fitch this (Wednesday) morning emphasised that it spent a lot of time discussing the feedback it received during the consultation period.

Deutsche Postbank is this (Friday) morning understood to have built a book for its debut jumbo public sector Pfandbrief that is believed to be by far the largest for a covered bond in more than a year and one of the biggest ever.

Better than expected first-quarter bank results and unguaranteed bond supply from lower rated financial institutions gave market participants in Europe and the US hope that the market is on the road to recovery this week.

Moody's yesterday (Monday) placed on review for possible downgrade the ratings of all five Portuguese covered bond issuers, and downgraded the parent of one.

Fitch is updating the residential mortgage default model criteria it uses for analysing Portuguese mortgage covered bonds and residential mortgage-backed securities, and expects to require higher overcollateralisation for covered bonds.

The financial institutions market today (Tuesday) burst into action with three guaranteed deals and one unguaranteed, after the quiet start to the week yesterday. And there is already speculation about the next mandate from Spain.

Standard & Poor’s has changed the outlook on its A ratings of Banco Espírito Santo and Banco BPI from stable to negative. It affirmed its ratings of the three other Portuguese banks that it covers, but said that Banco Comercial Português is among the most vulnerable.

The government guaranteed bank debt market was the juncture of two waves of negative sentiment in the markets this week, as downgrades hit the sovereign market and financial institutions suffered renewed pressure.

Standard & Poor’s yesterday (Wednesday) downgraded the ratings of Caixa Geral de Depósitos and Banco Santander Totta after cutting the Republic of Portugal’s rating from AA- to A+.