The Pfandbrief 2011 | 2012
The Pfandbrief 2011 | 2012
The Pfandbrief 2011 | 2012
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tion in the industry outlook in one country, the covered bond ratings are automatically at risk.<br />
<strong>The</strong>refore, in addition to a “negative outlook”, being placed on the “negative watch list” serves<br />
as another warning sign of a possible downgrade. It is therefore worth keeping an eye on the<br />
rating outlook.<br />
Of the benchmark issuers with benchmark transactions rated by Fitch, as many as 13%<br />
were valued as having a negative outlook at the end of June <strong>2011</strong>. Moody’s and S&P also<br />
awarded a “negative outlook” to 42% and 48%, respectively, of the benchmark issuers they<br />
analysed.<br />
<strong>The</strong> ratings carousel will continue to turn in the months to come. Further downgrades should<br />
be expected, particularly in the Portuguese, Irish, Greek and Spanish banking sectors. Due to<br />
the aforementioned link to the respective ratings on their unsecured bonds, the covered bond<br />
issuers in question will not be able to protect themselves from a downgrade of their covered<br />
bonds. In our view, investors will keep this in mind even if expected rating downgrades lead<br />
to wider and wider spreads. In addition, examples of individual issuers demonstrate that good<br />
covered bond programmes do not necessarily need top ratings in order to enjoy robust investor<br />
demand. Nevertheless, in the future issuers will continue to make efforts to achieve an<br />
AAA/Aaa rating. Currently, by far the majority of benchmark transactions in the covered bond<br />
market enjoy the top AAA/Aaa rating.<br />
At the end of June <strong>2011</strong>, 96%, 77% and 83% of public-sector covered bonds were given<br />
top ratings by Fitch, Moody’s and S&P’s, respectively, along with 71%, 65% and 82% for<br />
mortgage covered bonds.<br />
79<br />
Benchmark Issuer Ratings<br />
(As at 30 June <strong>2011</strong>)<br />
30<br />
25<br />
Number of ratings<br />
20<br />
15<br />
10<br />
5<br />
AAA/Aaa<br />
AA+/Aa1<br />
AA/Aa2<br />
AA-/Aa3<br />
A+/A1<br />
A/A2<br />
A-/A3<br />
BBB+/Baa1<br />
BBB/Baa2<br />
BBB/Baa3<br />
BB+/Ba1<br />
BB/Ba2<br />
BB-/Ba3<br />
0<br />
Fitch Moody's SAP