Germany

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.

Landesbank Hessen-Thueringen (Helaba) tapped the three year leg of its dual-tranche issue from May on Thursday morning, mirroring the syndication strategy it used to tap the deal’s seven year leg in July — aggressive pricing and doubling the size of the issue.

German Pfandbrief issuers have been obliged to publish loan to value ratios for their cover pools from the second quarter, in the wake of an amendment to the Pfandbrief Act. Loan-to-value (LTV) levels are generally low by international standards, but such comparison would be misleading given German idiosyncrasies, said DZ Bank and Commerzbank analysts.

Appetite for risk in the covered bond market has risen markedly over the last two years, according to a survey of the 180 German investors who attended NordLB’s global capital markets conference on July 17. (This article has one comment)

Growing demand for real estate finance in Germany is likely to trigger growth in mortgage Pfandbrief issuance over the medium term, said NordLB covered bond analysts in a recent briefing paper after outstanding mortage Pfandbrief volumes fell in 2013.

Deutsche Hypothekenbank, NordLB’s commercial real estate subsidiary, opened books on Monday for its first Pfandbrief of the year. Despite the time of year – this deal is the first German issuer to price a deal in the second half of July for over four years – leads attracted a heavily oversubscribed order book. Credit market conditions in the Euro area provided a constructive backdrop for execution, with Bunds stable and periphery markets recovering.

The first draft of the Pfandbrief Act 2015 offers some remarkable novelties, according to Commerzbank research, which said in its latest weekly publication that proposed changes should not cause any headaches — and may even improve transparency. Moody’s agreed saying that the draft proposals were credit positive.