Moody’s downgraded UniCredit Bank Austria mortgage-backed covered bonds from Aaa to Aa1 today (Monday) – just 12 days after having upgraded them – following a downgrade of the bank’s long term senior debt and deposit ratings.

The rating agency downgraded the long term rating of Bank Austria from Baa1 to Baa2 on Friday, in response to its lowering of the baseline credit assessment (BCA) of the bank’s parent company, UniCredit SpA, from Baa3 to Ba1.

Moody’s upgraded mortgage-backed covered bonds issued by Bank Austria from Aa1 to Aaa on 12 March following a change to its rating methodology, which provided the covered bonds with a new anchor point of the senior unsecured rating (SUR) plus one notch uplift, based on a Timely Payment Indicator (TPI) of “probable”.

“The downgrade means that the mortgage covered bonds, which were just upgraded from Aa1 to Aaa two weeks ago when Moody’s introduced their new covered bond rating methodology, will now have to go back down to their previous level of Aa1 as their TPI is only ‘probable’,” an analyst said in between the issuer and covered bond downgrades.

He noted that covered bonds issued by UniCredit SpA were unaffected because although its BCA was lowered its senior unsecured rating was unchanged.

The mortgage covered bonds were left on review for downgrade, alongside the issuer’s public sector covered bonds, with Moody’s assessing whether the issuer will commit the necessary overcollateralisation to compensate for increased expected loss.

The analyst added that he does not expect a downgrade of Bank Austria’s public sector covered bonds.

“The public sector backed covered bonds enjoy a TPI of ‘high’, which means with the senior rating of Baa2 and the one notch additional uplift from the new methodology they can just so keep the Aaa,” the analyst said.