Moody’s downgraded the mortgage and public sector covered bond programmes of Hypothekenbank Frankfurt today (Thursday) after having downgraded the German issuer yesterday, in a move that surprised analysts who had expected only the public sector programme to be cut.

Hypothekenbank Frankfurt (HF) public sector covered bonds were downgraded from Aa1 to Aa2, while HF mortgage covered bonds were cut from Aa2 to Aa3, after the issuer was downgraded from Baa2 to Baa3 yesterday (Wednesday).

Both programmes have Timely Payment Indicators of “high”, which combined with the new issuer rating of Baa3 caps the covered bonds’ rating at Aa2, said the rating agency.

As a result, the public sector covered bonds were downgraded by one notch, in line with analysts’ expectations. Unexpected, however, was the lowering of HF mortgage covered bonds’ rating.

Moody’s said that its expected loss analysis restricts the rating of the mortgage covered bonds rather than the TPI.

“With the committed overcollateralisation of 2% as required by the German covered bond act, the maximum achievable rating on the mortgage covered bonds is Aa3,” it said.

The overcollateralisation of the mortgage programme is 14%, of which only a statutory 2% is provided on a committed basis, according to Moody’s.