Covered Bond Comment Moody’s downgrades Greek covered bonds
Group Economics Macro & Financial Markets Research Joost Beaumont +31 20 628 3437 joost.beaumont@nl.abnamro.com
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07 May 2015
Moody’s finalises review on Greek mortgage covered bonds Secondary market activity still subdued Primary market is expected to pick up slowly
Moody’s finalises review on Greek mortgage covered
Primary market activity is expected to pick up slowly
bonds
Activity on the primary market is still very lacklustre. However,
Moody’s downgraded the ratings of 4 Greek covered bond
activity is slowly picking up as Alandsbanken will be arranging
programmes and confirmed the ratings of one other
a series of meetings with investors in Europe. This roadshow
programme (of Eurobank Ergasias). The programmes which
will most likely be followed by a EUR 250mn transaction, which
were downgraded were issued by National Bank of Greece (its
will be backed by prime Finnish mortgages. The last time that
Global covered bond programme and Covered bond
Alandsbanken entered the euro primary market was in October
programme II), Eurobank Ergasias and Alpha Bank. Moody’s
of last year. It issued a 4y EMTN covered bond transaction at
reviewed its ratings as it evaluated the relevant issuer ratings
MS +20bps. Currently this bond is trading at a slightly lower
at the end of April and as it lowered the Greek sovereign rating
level.
to Caa2. The Greek country ceiling was also lowered to B3, which now acts as a constraint for the covered bond ratings. Secondary market activity still subdued While the selloff in government bond market continued yesterday, liquidity in the secondary covered bond market remained poor as investors were largely absent. We encountered some two way flow, mostly focused in the 5y region of the curve. However, sizes were smaller than usual and the flow was concentrated in only a few names. Since trading activity was erratic, this makes it difficult to give a big picture perspective on market conditions. In addition, covered bonds ASW spreads remained relatively stable across the board. In general, we still think that investors will become more active when the market has cooled down and as yields have become more attractive.
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Bloomberg: ABNM