Standard & Poor’s upgraded mortgage-backed covered bonds issued by Banco Bilbao Vizcaya Argentaria from A to AA- on Monday because overcollateralisation has increased as a result of the redemption of outstanding cédulas.

The upgrade is the result of increased overcollateralisation following multiple redemptions over the past few months, including early amortisation of Eu4.2bn of cédulas hipotecarias in June. BBVA has only launched one covered bond issue, a Eu1bn 10 year that was sold on 4 June.

S&P has assessed that level of overcollateralisation for BBVA mortgage-backed covered bonds increased to 109% after the rating agency’s adjustments. The rating agency classifies the level of asset-liability mismatch risk in the programme as “moderate”. In combination with a Category 2 programme classification this allows the covered bonds to be rated up to five notches higher than the issuer, which S&P rates BBB.

BBVA’s covered bonds are on stable outlook at S&P.

“The stable outlook reflects that on BBVA,” said the rating agency. “This means that any rating action on the issuer will have a direct rating action on the mortgage covered bonds, all other things being equal.”