Germany

Deutsche Pfandbriefbank (pbb) and Dexia Kommunalbank are both exposed to bonds which are likely to be written down following the debt moratorium issued by Heta Asset Resolution — the Hypo Alpe Adria bad bank — last week. Several other German covered bond issuers are likely to be affected, said Commerzbank analysts. Austrian issuers are also being hit and have been put on review for downgrade by Moody’s.

Muenchener Hypothekenbank (MuHyp) issued the tightest ever 10 year covered bond on Monday with a book that was built in record time. At €750m the deal was much larger than anything seen in Germany in this tenor for several years. The strong uptake underscores the fact that, despite the extraordinarily tight price and large size, the rare transaction offered compelling relative value.

North Rhine-Westphalia will hit the 10 year part of the euro curve with its debut sustainability bond, which is expected to be priced this week.

While there is no immediate impact on Aareal Bank's Pfandbrief ratings following its planned acquisition of Westdeutsche Immobilienbank (WestImmo), the rating could change if the pools were merged, said Fitch on Thursday. However, analysts say a merged pool could be better quality and note that the covered bond ratings are well protected.

LBBW successfully issued a $500m three year Reg S Pfandbrief on Thursday. As the deal funded dollar assets, no swap costs were involved and the overall funding was marginally cheaper for LBBW than the level it could have achieved in euros. But with Pfandbrief yields negative in this tenor, euro issuance would have been impractical.

Landesbank Hessen-Thüringen Girozentrale (Helaba) issued a €1bn Pfandbrief on Wednesday at a final spread that was deeply through mid-swaps but got a strong response as it was able to offer a positive spread to Germany, where yields are negative. At the same time, Danske Bank issued this week’s only euro benchmark. As it was not eligible for the covered bond purchase programme it offered a quite attractive spread.

The primary market sprang back to life on Tuesday, as covered bonds from lower rated issuers in Germany and Italy attracted books that were many times covered. The successful outcomes illustrated that the market was not concerned about the outcome of negotiations on the extension of the Greek debt bailout or the prospective timing of the first US rate hike.

Hypo Real Estate has mandated Citigroup and Deutsche Bank to advise on the sale of Deutsche Pfandbriefbank, a requirement imposed on HRE after it was bailed out by the German state, according to a press release published on Tuesday afternoon.

NordLB has issued a four year public sector backed Pfandbrief on a very well oversubscribed book at the lowest ever coupon and at an extraordinarily tight spread. The deal, which comes in the bank’s 250th anniversary, is likely highlight relative value to the planned issuance of its inaugural benchmark Lettre de Gage, which will also be backed by public sector assets.

North Rhine-Westphalia is set to become the first German state and one of a handful of European sub-sovereign borrowers to enter the green bond market, after mandating banks on Wednesday to roadshow for its inaugural deal in the format.

HSH Nordbank was set to price its first Pfandbrief backed by ships (Schiffspfandbrief) in five years on Tuesday. The Baa2-rated deal was never likely to appeal to the broad investor base that buys mortgage-backed deals, but with an attractive spread it still managed to get an oversubscribed book.

HSH Nordbank returned to the covered bond market on Monday opening books for its first benchmark Schiffspfandbrief in five years. The short maturity, eye-catching spread and heavily overcollateralised pool of low LTV shipping loans suggests the transaction offers compelling value compared to mortgage Pfandbriefe.