(Repeat for additional subscribers)
Feb 4 (The following statement was released by the rating agency)
Fitch Ratings has published the Mortgage Liquidity and Refinancing Stress addendum for its covered bonds criteria. The addendum details Fitch's assumptions on liquidity gap risks in mortgage covered bond programmes. It also details the agency's rating spread levels and price caps used to calculate expected sale proceeds on mortgage cover assets. The new addendum replaces the version published on 3 June 2013.
Fitch's rating spread levels have been updated for countries that have had a sovereign downgrade, such as France, or where Fitch observed significant movements of secondary market spreads. The revised rating spread levels are not expected to impact any covered bonds' existing ratings, although over-collateralisation for a given rating may increase or decrease, depending on the relevant pool composition and the extent of maturity mismatches. The refinancing costs of peripheral European countries have decreased, although they still remain at elevated levels. Elsewhere, the agency has observed an overall stabilisation of secondary market spreads over the past nine months, reflecting the easing of the eurozone crisis.
A full list of the agency's rating spread levels has been published in a separate spreadsheet entitled "Fitch's Mortgage Covered Bonds Rating Spread Levels", dated 4 February 2014.
These levels reflect the agency's view of the stressed cost of refinancing mortgage assets, following an issuer default. There have been no changes made to the agency's price cap assumptions.
The updated report and accompanying spreadsheet are published as an addendum to the Covered Bonds Rating Criteria and should be read in conjunction with said report.
Fitch publicly rates 106 mortgage covered bond programmes, issued out of 21 countries.
The report is available on www.fitchratings.com or by clicking on the link below.
Link to Fitch Ratings' Report: Covered Bonds Rating Criteria Mortgage Liquidity and Refinancing Stress Addendum