...Impact of Interest Hedging: Both the two Fitch-rated Swiss contractual covered bond programmes are secured by standard Swiss residential loans and rated `AAA'. The difference in their Fitch `AAA' breakeven asset percentage (BE AP) ¡ 85% for Credit Suisse AG's (CS) covered bonds and 88% for UBS AG's covered bonds ¡ is mostly driven by deviating interest hedging strategies. CS hedges cover assets up to the notional amount of liabilities. Consequently, overcollateralisation (OC) remains unhedged, resulting in only 75.7% of CS's cash flows paying a variable rate, compared with 100% of the bonds on a post-swap basis. In an increasing interest-rate environment, the net present value of the assets decreases and consequently the cash flow valuation component increases. UBS fully hedges assets and liabilities into floating rate, which makes the programme resilient against interest-rate moves. Wind-Down Programmes: Both banks stopped issuing under the existing programmes when the issuers changed...
