German Sovereign

The German State of North-Rhine Westphalia has had one of its most successful transactions in recent history on Tuesday with a €1bn seven year bond, which drew demand of over €2.7bn and was priced 3bp inside initial price thoughts.

If any set of borrowers has an access all areas pass to the capital markets party, it is Germany’s public sector credits. The Bund remains Europe’s de facto benchmark security and, along with the agencies that the federal republic also guarantees, is enjoying a period of sustained low yields and tight spreads. None of that looks set to change as the number of triple-A ratings around the globe dwindles. But that is not to say that German public sector funding officials can put their feet up and watch the cash roll in. KfW continues to help develop new markets, such as the offshore renminbi market, while the German Finance Agency has a new head, Tammo Diemer, who is taking over at a time when German finances are at the heart of Europe’s economic health. Diemer and KfW’s Frank Czichowski, along with senior capital markets bankers, joined EuroWeek in mid-March to discuss the German public sector bond markets.

In spite of Germany’s well developed support system for the federal states, investors clearly do not believe that the 16 Länder share the same credit quality, meaning that the funding status quo will remain broadly in place, with the weaker states accessing the market through pooled jumbo issues and the stronger borrowers issuing on a standalone basis. Unless of course, the German finance ministry changes its mind and endorses the Deutschland Bond concept. Stranger things have happened — even in Germany. Philip Moore reports.

German public sector borrowers have had a whale of a crisis. Indeed it is hard to find a point along the German sovereign’s curve at which an investor won’t have to pay, in real terms, for the privilege of funding Europe’s biggest economy. Ralph Sinclair discovers why that trend is set to continue.

While Frankfurt vies with Paris to be Europe’s financial centre, it remains eclipsed by London. As Chris Wright reports, the only possible way it can usurp London’s position is if the UK were to quit the European Union. And although its political relationship with Europe is fractious, the UK knows it has too much to lose to let that happen.

The impressive stability of German real estate is drawing an expanding equity investor base but the onerous requirements of listing mean supply will likely continue to lag demand. Lucy Fitzgeorge-Parker reports.

France, Cades and the State of North-Rhine Westphalia have mandated banks to lead manage euro benchmarks as an agreement on the Cyprus bailout provided a good enough backdrop for SSAs to get stuck into the euro market.

German regions opted to increase existing deals this week, as City State of Hamburg priced a tap and State of Rhineland Palatinate also mandated banks for a reopening.

FMS Wertmanagement and the State of Thuringia both came to market with euro trades on Wednesday, FMS launching a new long two year line and Thuringia tapping seven year paper. Both issuers were able to achieve favourable pricing in not entirely favourable market conditions.

The Federal State of Brandenburg priced an eight year benchmark trade on Tuesday. Demand for the paper was buoyed by deteriorating sentiment on the eurozone’s periphery, leading to a more granular and high quality orderbook than is sometimes seen on trades from Germany länder.

The Federal State of Hessen has mandated banks for its second syndicated trade of the year, a seven year fixed rate deal expected to launch on Tuesday morning. Leads are expecting to attract enough demand for a benchmark trade, but, with pricing tight for German states, it could be difficult to stir up demand.

The EIB opened its EARNs programme for the year on Thursday with a successful five year deal that achieved giant size, tightened pricing and a sub-Libor reoffer level. The deal was the latest example of how much January 2013 has so far felt like a return to pre subprime crisis days in the SSA market.