CIF Euromortgage obligations foncières were yesterday (Tuesday) suspended from trading at the request of the French financial markets authority pending further information, leaving market participants speculating as to the reason and putting on hold any issuance from France.

According to Commission de Surveillance du Secteur Financier, the Luxembourg regulator, France’s Autorité des Marchés Financiers (AMF) yesterday called for the suspension of all Caisse Central du Crédit Immobilier de France (3CIF) and CIF Euromortage bonds from trading on Euronext Paris, pending a press release and until further notice.

Natixis analysts said that three CIF Euromortgage obligations foncières were affected: CIF 4.25% October 2016, CIF 4% December 2013 and CIF 3.625% March 2016.

SIX Swiss Exchange also suspended CIF Euromortage bonds at the request of AMF.

CIF Euromortgage had not responded to enquiries by the time The Covered Bond Report went to press.

The suspension left covered bond market participants speculating as to the reasons behind the move in the absence of any further communication on the matter, although they said that any rumours should be taken “with a pinch of salt”.

Among reasons suggested for the suspension included the French mortgage lending specialist group being merged with another French bank, with an announcement possibly forthcoming today (Wednesday) about support and/or a takeover.

A syndicate official said that a merger with another French bank would be good news, and played down the longer term consequences for the French covered bond market.

In the short term, however, any planned issuance by Caisse de Refinancement de l’Habitat, which had been mentioned as a candidate for issuance this week, or other French issuer is likely to have to be put on hold given such background noise, according to syndicate officials.

One said that CRH had been linked with a 10 year trade, which he would have seen coming at around 100bp over, but he noted that the issuer had not made any official announcement despite a possible deal being well flagged and that this could be because of the uncertainty surrounding the suspension of CIF Euromortgage’s bonds, with widening of French government bonds today perhaps also playing a role.

French government bonds were around 5bp-6bp wider today in response to political developments in Greece and questions about the implementation of austerity measures in France.

“That is putting investors off from getting involved,” he said.

Another syndicate banker said that there is “not a huge focus” on CIF Euromortage in the market today, with many rumours circulating, and that the market is fairly stable, although bid-offer spreads are wide.

“The market is looking for direction in the upper level, from the govvie market,” he said. “CIF Euromortgage obligations foncières are a little bit weaker but I haven’t seen any meaningful trading.”

Another syndicate official said that there were some “cheeky bids” at very wide levels for the French issuer’s covered bonds, but with no counter offers, while another said this morning that the obligations foncières were underperforming on the back of the trading suspension.

3CIF senior debt was said to be quoted some 30bp wider.

Another said that the suspension of CIF Euromortgage’s bonds has not had a big impact on the secondary market in general, with spreads fairly stable.

CIF Euromortgage obligations foncières are rated Aaa by Moody’s, on review for downgrade. Caisse Centrale du Credit Immobilier de France, the sponsor bank, which is rated A1, is also on review for downgrade.

With a Timely Payment Indicator (TPI) of “probable-high” this means that the covered bonds would keep their Aaa rating, all else being equal, as long as the sponsor bank rating is not cut by more than two notches.

However, an analyst said that with the senior unsecured rating of the sponsor entity facing a downgrade by Moody’s of up to four notches, a downgrade of the obligations foncières seems very likely.

CIF Euromortgage’s covered bonds are also by Fitch, which has assigned them a AAA rating, based in part on a Discontinuity Factor (D-Factor) of 15.3%.