Moody’s has downgraded public sector covered bonds issued by Kommunalkredit Austria after cutting the issuer rating from Baa1 to Baa3 on Thursday.

The fundierte Bankschuldverschreibungen were downgraded from Aa1 to Aa2 on Friday.

The rating agency said that the downgrade of the bank’s covered bonds is not due to deterioration in the credit quality of the cover pool assets.

It said that the rating of the covered bonds is restricted at Aa2 as a result of the combination of a Timely Payment Indicator (TPI) of “high” and the issuer rating, and that overcollateralisation (36% on a nominal basis as of 31 December) is sufficient to support this rating.