Germany

Aareal Bank brought the covered bond market’s third tap of the week on Wednesday, and priced a €125m increase of a mortgage backed Pfandbrief inside mid-swaps. As investors look for more liquidity German borrowers are finding it harder to drum up demand in the private placement market and taps could take up some of the slack, said bankers.

The provision for loan-to-value disclosure in proposed changes to the German Pfandbrief Act are credit positive, said Fitch on Wednesday. But the provision of whole loan LTV disclosure would be better as it would give investors a clearer picture of default risk.

Despite a UK holiday syndicate bankers are not ruling out deals on Monday, and there are still borrowers eager to execute bonds in run up to summer, they said.

Münchener Hypothekenbank tapped its recent three year sterling floater for another £100m on Tuesday, taking advantage of a market window before holidays and programme updates prevent issuance.

The shipping crisis will last longer than expected and is keeping German banks in particular under pressure, Fitch said on Thursday.

Moody’s downgrade of Commerzbank and Hypothekenbank Frankfurt (Hypfra) will leave Commerzbank’s covered bonds unscathed but push Hypfra’s public sector bonds down to Aa2, analysts said on Wednesday.

Aareal Bank closed a £200m sterling FRN on Wednesday, making its public debut in the currency two decades after entering the UK commercial real estate market.

Sparkasse KölnBonn returned to covered bonds in style on Tuesday, breaking through into the single digits over mid-swaps for its first benchmark deal in five years.

Aareal Bank is the latest German borrower to tap the sterling market, having approached investors with price thoughts for a £200m three year floater.

Sparkasse KölnBonn is set to announce a deal in the belly of the curve, somewhere in the region of five years, bankers told The Cover on Monday. Other issuers, possibly from Europe’s periphery, are also considering deals, said bankers, after further strong performance in the secondary market.

Covered bond issuers decided against bringing benchmark bonds on Friday despite a better backdrop, but there are several potential deals in the pipeline and stronger sentiment should encourage issuers looking to come next week, said bankers.

Münchener Hypothekenbank opened books on a £200m three year floating rate deal on Wednesday morning, becoming the latest borrower to take advantage of a starved sterling investor base.