A Standard & Poor’s upgrade of Spain from BBB- to BBB today (Friday) is unlikely to result directly in better cédulas ratings, said analysts, although it could give more leeway for Spanish covered bonds when the rating agency finally implements related methodology changes.

According to Florian Eichert, senior covered bond analyst at Crédit Agricole, cédulas hipotecarias can be rated up to six notches higher than the sovereign under S&P’s methodology. He noted that only two single issuer Spanish programmes rated by S&P have been rated at the AA- cap based on the previous sovereign rating – those of CaixaBank and Kutxa – and that both are also limited at AA- because of other aspects of the rating agency’s criteria, meaning that they would only be upgraded if the issuers were upgraded.

Eichert nevertheless noted that long-awaited changes to S&P’s sovereign ceiling methodology are also due, and that under the proposals included in its related request for comment these could lower the maximum notch uplift above the sovereign rating from six to two notches.

“With a BBB- rating, two extra notches would have meant a rating in triple-B territory,” he said. “So in other words, the upgrade of Spain doesn’t automatically have a positive impact on cédulas unless the issuers are moved up.

“But it does limit the potential downside from S&P’s still outstanding new sovereign ceiling methodology. And when it comes to sensible covered bond methodology adjustments, I put the least amount of my money on S&P, so limiting the downside is a good thing.”

Günther Scheppler, covered bond analyst at DZ Bank, said that the pending methodology change could impact the timing and nature of any S&P move on the cédulas.

“Perhaps S&P is not willing to act prior to putting the new methodology in place, with the maximum uplift about to change,” he said. “It may decide to act quickly and use the existing methodology, or they may choose to wait until it has introduced its updated framework.”

The upgrade of the Spanish sovereign reflects S&P’s view of improving economic growth and competitiveness as a result of the country’s efforts in structural reform since 2010. In addition to the upgrade, it has changed the country outlook from negative to stable.