Moody’s raised the country ceiling for Greece to Ba3 on Friday, a move thought to bode well Greek covered bond ratings, while Fitch yesterday (Monday) noted that Eu6bn of covered bonds maturing in 2014 were refinanced via recent maturity extensions.

According to Fitch, there are Eu15bn of Greek covered bonds outstanding, of which 94% are self-retained and, in most cases, used for repo transactions with the central bank or with private investors for liquidity purposes.

The only publicly placed outstanding Greek covered bonds are Eu846m of National Bank of Greece (NBG) October 2016 issuance, launched off its Programme I, according to Fitch.

Moody’s upgraded Greece from Caa3 to Caa1 on Friday, and raised the local currency ceiling (LCC) from B3 to Ba3. The upgrade of the sovereign reflected Moody’s expectation of an improvement in Greece’s economic outlook, and fiscal position, and a reduced government interest burden and lengthening of debt maturities.

Greek covered bonds are rated B3 by Moody’s, the level of the previous country ceiling. The covered bonds were upgraded to B3 in December after the rating agency had the previous month lifted the Greek country ceiling from Caa2 to B3.

The latest lifting of the country ceiling raises the prospect of a fresh upgrade of Greek covered bonds, subject to sufficient overcollateralisation (OC) being available.

The required OC for their prevailing B3 rating, according to a fourth quarter 2013 monitoring overview from Moody’s, was 0% for Alpha Bank, Eurobank Ergasias, and NBG covered bonds. Committed OC for all but the sole publicly outstanding Greek covered bond stood at 5.3%, according to Moody’s – the committed OC backing NBG’s publicly placed issuance stood at 81.8%.

The Greek covered bonds rated by Moody’s are those launched off an Alpha Bank direct issuance programme, two Eurobank programmes, and two NBG programmes.

Fitch, meanwhile, upgraded five Greek covered bond programmes on 25 July. Unlike Moody’s, it does not rate Eurobank’s Programme II, but it rates Piraeus Bank covered bonds.

Fitch yesterday said that a late May increase in the country ceiling, from B+ to BB, contributed to an upgrade of the NBG Programme I issuance, from B+ to BB-. The rating had been constrained by the country ceiling, according to Fitch. Fitch rates the other Greek programmes B+.

Fitch rates the Greek covered bond programmes on a recovery basis only, either because it believes there is “full discontinuity risk” or because the level of asset percentage (AP) that it gives credit to does not support timely payments in scenarios above the long term issuer default rating (IDR), after an IDR uplift.

Three Greek covered bond programmes were restructured in the first half of this year, changing from a pass-through to soft bullet, or from a pass-through to conditional pass-through (CPT) amortisation profile, according to Fitch.

“Refinancing of Eu6bn covered bonds maturing in 2014 has been completed via the recent extensions of the initial scheduled maturity date,” it said. “Of the outstanding covered bonds, 64% (equivalent to Eu9.6bn) will mature in 2015 and 2016.”

Fitch said that it believes the covered bond market will remain weak in 2014 and that the prevailing macroeconomic environment and private sector dynamics will limit issuance activity to retained issuances or rescheduling of covered bonds’ original maturities.

“As the private lending ability of Greek banks is limited and the spending power of Greek households remains at historic lows, Fitch does not expect origination volumes of new loans eligible to the cover pools to boost in the short horizon,” it said.

However, it noted that Greek issuers are relying less on Emergency Liquidity Assistance (ELA) from the European Central Bank as a source of funding and are seeking funding from private investors, mainly via repo transactions with market players.