Feb 01 - Fitch Ratings has updated the Public Sector Liquidity & Spread Assumption Addendum for its covered bonds criteria. The addendum details Fitch’s revised assumptions on liquidity gap risks in public sector covered bond programmes and the agency’s stressed spread assumptions for European sovereign debt. The new addendum replaces the version published on 27 November 2012.
Fitch has made changes to the allocation of cover assets to liquidity classes. Liquidity class 2 now represents the most liquid class, class 7 the least liquid one. The allocation of assets to liquidity classes 2-7 is based on country of debtor/guarantor, debtor type and asset type, where countries are grouped in one of four categories depending on the sovereign rating and the depth of the secondary market. Countries within the European Economic area and a sovereign rating of at least ‘AA-’ as well as the US and Switzerland are considered to be in the most liquid category.
Fitch will apply the updated classification in its analysis of European public sector covered bonds programmes over the next six months. The agency does not expect the Discontinuity Cap assessment for these programmes to be impacted by this reclassification.
The criteria assumptions are an addendum to the Covered Bonds Rating Criteria and should be read in conjunction with this report.
Fitch publicly rates 22 public sector covered bond programmes, issued out of nine countries. The current ratings are in the investment grade range.
The report is available at www.fitchratings.com or by clicking on the link below.
Link to Fitch Ratings’ Report: Covered Bonds Rating Criteria - Public Sector Liquidity and Spread Assumption Addendum