Standard & Poor’s has upgraded Banco Popular Español mortgage covered bonds from BBB to BBB+ because of reduced asset-liability mismatch risk, which increases by one notch the maximum possible uplift from the issuer rating to the rating of the cédulas hipotecarias.

The rating agency carried out the upgrade on Thursday, noting that Banco Popular on 31 July redeemed early Eu6.05bn of covered bonds and issued notes for Eu5.25bn. The Eu6.05bn of bonds were due to mature between October 2013 and April 2016, and the newly issued cédulas mature between August 2025 and November 2028.

“This reduced the asset-liability mismatch (ALMM) risk in its mortgage covered bond program to 22.9%, a level that we consider ‘moderate’ according to our criteria,” said S&P. “This increases by one notch the maximum potential uplift above the issuer credit rating, which we use to derive the covered bond rating.”

S&P rates Banco Popular BB-, on negative outlook, and said that it considers the prevailing level of available credit enhancement to support the maximum potential uplift of five notches.

The covered bonds are on negative outlook, in line with the outlook on the issuer’s rating.