Germany

A 10bp new issue premium was not enough for HSH Nordbank to attract a fully subscribed book for its €500m seven year Pfandbrief issued on Monday. Though it was cheap to the curve, the deal was much more expensive than other higher rated, shorter dated agency debt offered at the same time.

With China’s trading volume with Germany the same size as its volume with France, the UK and Italy combined, it is not just the German exporters who are beginning to benefit. Chinese investment in Germany has also become a trend too important to ignore. Philip Moore reports.

Muenchener Hypothekenbank returned to covered bonds for the second time this year to fill out its curve with an eight year deal. The bond size was increased following strong demand, partly driven by the recent rise in Bund yields.

Muenchener Hypothekenbank announced an eight year Pfandbrief on Monday afternoon but with several data points and public holidays this week, few others are likely to follow in euros. In addition, a shaky trade by Banco Sabadell on Friday has done little to instil confidence in peripheral issuers.

Muenchener Hypothekenbank has mandated banks for an eight year mortgage bond, its second Pfandbrief this year.

The last six months have turned the game of debt issuance on its head for German banks and their investors. In October the European Central Bank elbowed its way into the covered bond market as a buyer, building a portfolio that already sits at over €80bn and has pushed many German financial borrowers’ Pfandbrief spreads deeply negative. In March it upped the ante, starting a €60bn a month quantitative easing programme in European government bonds.

German companies have been — compared with most European peers — very well off for funding throughout the financial crisis. Blue chips issue bonds at tighter spreads than comparable companies in other countries. For the Mittelstand, Germany’s multilayered banking system — backed up by the unique Schuldschein market — means many firms are spoilt for choice when it comes to funding.

DG Hyp printed the second German Pfandbrief of this week on Thursday, proving the market is very much open to German borrowers. But the success of the deal does not guarantee an easy reception for Banco de Sabadell, the first peripheral name to mandate since Bank of Ireland on April 29.

Shanghai Stock Exchange (SSE), China Financial Futures Exchange (CFFE) and Deutsche Börse agreed on Wednesday to launch a joint venture that would allow international investors to trade financial instruments offering underlying exposure to China.

Sparkasse KölnBonn broke the three week supply drought with its €500m seven year Pfandbrief on Wednesday. The deal was an undoubted success and bodes well for further issuance, but negative headline risk and the fear of volatility means issuers should take a cautious approach to pricing – as demonstrated in the senior unsecured market

The German issuer has mandated leads for a mortgage backed Pfandbrief with a nine year maturity which is expected to price on Thursday.

Six of the 10 programmes with the lowest loss assumption modelled into their rating by Moody’s are German public sector backed Pfandbriefe. This suggests that, despite previous concerns related to their exposure to the Austrian bad bank Heta Asset Resolution, German public sector covered bonds are backed by standout high quality collateral.