Fitch downgraded the OBGs of Banca Popolare di Sondrio and the soft bullet and CPT programmes of UniCredit to AA last week, following a downgrade of Italy and consequent lowering of the country ceiling. The issuers’ spreads have, however, not been affected.

On 21 April, Fitch downgraded Italy from BBB+ to BBB, citing an increased exposure to potential adverse shocks for the country, compounded by increased political risk and ongoing weakness in the banking sector. Fitch subsequently revised Italy’s country ceiling from AA+ to AA.

On Thursday of last week (27 April), the rating agency then downgraded the obbligazioni bancarie garantite (OBG) programme of BP Sondrio and the soft bullet and conditional pass-through (CPT) OBGs of UniCredit, all from AA+ to AA on stable outlook.

The revised country ceiling is the maximum rating currently achievable for the programmes. Fitch said the stable outlook on the OBGs reflects that on Italy’s rating and a significant buffer against a downgrade of the banks’ IDRs due to various uplift factors.

Analysts said the downgrades should have no implications for the covered bonds’ regulatory treatment and spread performance, and syndicate bankers noted that the issuers’ OBGs had performed in line with those of other Italian issuers this week.