Germany

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.

The covered bond market is open for business and Sparkasse KölnBonn has announced it will go ahead with a deal on Wednesday, the first euro benchmark in over three weeks. Though there is also a possibility that another core issuer could soon emerge, borrowers are in no rush as they fear that the generous new issue premium they may need to pay will re-price their curves.

NordLB reopened its four year public sector backed Pfandbrief on Wednesday in a move which locks in cheap funding. But the 10bp yield offers little buffer in a market characterised by rate volatility.

Leads KSK Koeln, LBBW, and WGZ opened books on an €250m eight year Pfandbrief for Kreissparkasse Koeln (KSK Koeln) on Monday as Bund futures showed signs of stability. Nordic issuers are circling and could take advantage of better conditions ahead of an EU meeting on Greece at the end of this week.

The German Pfandbrief market continues to shrink, driven by a decline in the public sector, which is now almost the same size as the growing mortgage sector, according to the first quarter cover pool data recently published by the Association of German Pfandbrief banks (VDP).

Kreissparkasse Koeln (KSK Koeln) has named lead managers for an eight year covered bond. The bank has issued two previous covered bonds, but this is the first time it is targeting investors outside of the German savings bank network. The deal is expected in the near future.

Sparkasse Koelnbonn is meeting investors from May 18 for what is becoming its annual €500m bond issue. While the deal will only go live subject to investor feedback and market conditions, bankers are expecting a five to seven year transaction the week after next.