Germany

HSH Nordbank opened books on Tuesday on an Aa3-rated €500m no-grow seven year mortgage-backed Pfandbrief, its second covered bond deal of 2014. Bankers said the level of oversubscription was further evidence of the divergence in popularity between covered bonds likely to be included in the ECB’s third covered bond purchase programme (CBPP3) and those which are likely to be outside, such as Tuesday’s other euro-denominated benchmark, from Swedish Covered Bond Corporation.

HSH Nordbank and the Swedish Covered Bond Corporation (SCBC) mandated leads for euro benchmarks that are likely to be launched on Tuesday.

Commerzbank opened books for a €1bn five year mortgage Pfandbrief on Monday, and was set to issue in line with the spread achieved by Compagnie de Financement Foncier (CFF), which issued a deal of the same tenor two weeks ago. The pricing shows that there is no longer a spread between French and German covered bonds.

Covered bonds backed by environmental and social governance (ESG) mortgage loans are expected to become an important component of the booming socially responsible investment market following a ground-breaking Pfandbrief issued this week by Münchener Hypothekenbank (Muhyp). But bringing trades to market will not be without its challenges.

Münchener Hypothekenbank (Muhyp) has priced the first covered bond backed by environmental and social governance (ESG) mortgage loans. The €300m deal attracted a rich new seam of demand from investors that had never bought covered bonds from this issuer, in a move that is expected to spur other borrowers to consider ESG covered bond deals of their own.

Westfälische Landschaft Bodenkreditbank (WL Bank) opened books on Thursday on an AAA rated €600m no-grow 10 year mortgage-backed Pfandbrief, its second deal of the year and the fifth 10 year print to come out of Germany in 2014. In contrast to Aareal Bank’s deal on Wednesday WL’s order book was oversubscribed many times.

Aareal Bank capitalised on the momentum created by the two successful French deals issued through mid-swaps on Monday and Tuesday by bringing forward plans to issue a euro-denominated covered bond, opening books on a three year deal on Wednesday rather than waiting until next week.

Jens Tolckmitt, chief executive of the Association of German Pfandbrief Banks (vdp) speaks to The Cover about Pfandbrief quality — "striving to be first in class".

German banks and their covered bonds are unlikely to be affected by volatility in house prices according to a report published by Standard & Poor's on Wednesday. A 20% decline in prices would barely change the amount of collateral needed to get a top rating.

Deutsche Pfandbriefbank (PBB) reopened the covered bond primary market with a storm on Tuesday, printing one of the most oversubscribed German deals this year. The book featured a high proportion of international demand for a Pfandbrief, and one of the highest levels of central bank participation on record for a German deal.

Deutsche Pfandbriefbank has mandated leads for a three year Pfandbrief.

The Pfandbrief market is in a state of flux with as many as five mortgage lenders looking to be sold to new owners. But the fact Düsseldorfer Hypothekenbank has managed to find a buyer, despite Fitch’s assertion earlier this week that the German mortgage bank model was under severe pressure, shows that it’s possible for such institutions to attract interesting bids.