Moody’s followed up a downgrade of Banca Popolare di Milano to sub-investment grade yesterday (Thursday) by cutting the Italian bank’s mortgage covered bonds from A2 to Baa2, with the OBGs’ rating left on review for downgrade.

BPM’s rating was lowered from Baa3 to Ba3 and analysts had expected a downgrade to the Baa2-Baa3 to result from this.

Moody’s downgraded the covered bonds late yesterday, saying that the new Ba3 issuer rating combined with a Timely Payment Indicator (TPI) of “improbable” constrains the OBGs’ rating at Baa2.

The covered bonds were left on review for downgrade alongside the issuer.