Covered bond analysts expect several Spanish covered bonds to be upgraded by Moody’s because the rating agency raised the country’s sovereign ceiling on Friday after upgrading Spain from Baa3 to Baa2.

Florian Eichert, senior covered bond analyst at Crédit Agricole, noted that the sovereign ceiling for cédulas has been raised from A3 to A1, and that this will allow for upgrades of several cédulas programmes that are rated lower than they could be under Moody’s Timely Payment Indicator (TPI) framework because of the sovereign cap.

“We’re getting pretty close to the double-A rating category here at least when looking at Moody’s,” he said.

Michael Spies, analyst at Citi, also noted that a higher sovereign cap should be positive for several cédulas programmes, saying that their theoretical rating based on Moody’s TPI matrix increased after the rating agency in December changed the TPIs for cédulas from “improbable” to “probable”.

The cédulas identified by analysts as likely to be upgraded, either to the new sovereign ceiling of A3 or to the maximum rating based on the TPI matrix if lower, include cédulas hipotecarias issued by Banco Santander, BBVA, Bankinter, CaixaBank, and Kutxabank, as well as cédulas terriotoriales issued by Santander, BBVA, and CaixaBank.

Citi’s Spies noted that Banca Sabadell covered bonds are rated at A3, which is the maximum achievable rating under Moody’s TPI matrix given a Ba2 issuer rating and that the cédulas therefore do not stand to benefit from the higher sovereign cap.