The announcement of a second covered bond purchase programme by the ECB last week might not have had the dramatic impact of CBPP1 in May 2009, but market participants were taking away positives at the end of a week featuring six new euro benchmarks totalling Eu6.65bn.

With the exception of outliers such as Dexia, the reaction of secondary spreads has been relatively muted in the wake of CBPP2’s announcement, but the relative performance of primary and secondary spreads has changed since the last wave of benchmark covered bond supply, noted market participants.

“It is encouraging to note that secondary spreads have remained firm despite the reopening of the primary market,” said Lorenz Altenburg, head of covered bond syndicate at Nomura. “The last reopening in August sent secondary spreads gapping wider.”

As in 2009, the announcement of the European Central Bank’s action has coincided with broader positive sentiment in the financial markets, with senior unsecured supply and residential mortgage backed securities also hitting the market as hopes of a resolution to the sovereign crisis rise.

Armin Peter, head of covered bond business and syndicate at UBS, said that after this week’s activity the market had a solid base to build on.

“The market likes the noise coming out about the EU’s intention to fix the sovereign crisis and hopes are high,” he said. “People have therefore been reducing underweights and short positions, and they still have some way to go.

“This is why the market shrugged off the news on Spain and the bank rating actions. And as long as there is nothing bad this afternoon then I could imagine that the improvement will continue next week and we could see more deals.”

Standard & Poor’s downgraded Spain from AA to AA- late yesterday (Thursday), while Fitch took negative rating actions on several major international and UK banks.

Fitch today (Friday) cut four Spanish and one Portuguese covered bond programmes, saying that the rating actions reflected a downgrade of Spain last Friday (7 October) and subsequent issuer downgrades.

Banco Santander’s cédulas hipotecarias were lowered from AAA to AA+, Banesto’s from AA to AA-, Banco Popular Español’s from AA+ to AA and placed on Rating Watch Negative, Banco Guipuzcoano’s from AA+ to AA, and Portugal’s Santander Totta’s mortgage backed covered bonds from AA to AA-. Fitch maintained Banco Popular Portugal’s mortgage backed programme, rated A+, on Rating Watch Negative.

South Korea’s Woori Bank is understood to have awarded Royal Bank of Scotland the mandate to arrange a covered bond programme.