Moody’s raised the country ceiling for Ireland from A2 to Aa3 on Friday in connection with a two notch upgrade of the sovereign from Baa3 to Baa1, with analysts expecting any positive impact on Irish covered bond programmes to be limited to public sector-backed ACS of Depfa and EAA.

Jan King, senior covered bond analyst at RBS, said that Depfa ACS and EAA Covered Bond Bank public sector-backed covered bond programmes should be upgraded as a result because the ratings had previously been constrained by the sovereign ceiling. However, King noted that EAA has no euro benchmark covered bonds outstanding, having paid off its last, a Eu1.5bn issue, in March.

Florian Eichert, senior covered bond analyst at Crédit Agricole, noted that EAA’s ACS programme benefits from a one notch uplift over the sovereign ceiling.

“So I could very well imagine the programme to be moved up to Aa2,” he said. “Thus maintaining its one extra notch above the sovereign ceiling.”

According to Eichert, Irish mortgage-backed ACS have not been rated at the sovereign ceiling in the past, with the ratings constrained by the issuer rating and Moody’s Timely Payment Indicator (TPI) for Irish mortgage-backed programmes.

“Consequently, they did not reach the former A2 sovereign ceiling and will not be moved up to the new ceiling automatically,” he said. “In fact, to be able to reach the new sovereign ceiling, Bank of Ireland’s deposit rating would have to be upgraded by three notches from Ba2 to Baa2. However, its unsecured rating is still on ‘negative’ outlook.”

King said he felt an upgrade of Bank of Ireland and Allied Irish Banks mortgage-backed covered bond programmes was “not impossible, but the bar for an upgrade of either the TPI or the deposit ratings seems relatively high”.

The sovereign upgrade reflects Moody’s belief that there has been a recent pick-up in Irish growth momentum, which is said will speed up ongoing fiscal consolidation, and as such, speed up government repayment of debt. In addition, the rating agency said that the country has sharply reduced its off-sheet balance exposures, and improved its credit position relative to other peripheral countries that Moody’s rates.