Germany

HypoVereinsbank (HVB) closed a €500m seven year mortgage Pfandbrief on Monday after opting for a more generous starting point than those on recent German deals. It was rewarded with a far larger orderbook, which allowed it to price the bond well inside initial price thoughts.

Covered bond syndicate officials are predicting as many as five deals will be launched next week following a wave of successful core transactions.

Two leading covered bond investors based in Germany have told The Cover why they are investing, despite record low yields, and what strategic shifts they are pursuing.

Bayerische Landesbank sold a smoothly executed €500m 10 year transaction on Thursday, with cash rich investors willing to compromise on tight spreads and low coupons. But peripheral issuers could soon offer them juicer yields, said bankers.

Münchener Hypothekenbank (MuHyp) closed another successful euro benchmark this week and could visit the dollar market later in the year. But it also has its sights on the sterling market, where investors have become increasingly receptive to the tight spreads German borrowers offer.

Persistent interest from domestic investors prompted HSH Nordbank to increase a recent €500m public sector backed bond by €250m.

Germany’s Sparkasse KölnBonn is preparing to return to the covered bond market with its first benchmark transaction in five years.

Net euro denominated covered bond supply has dropped to the lowest level since the euro begun. And with a surfeit of central bank liquidity alongside continued balance sheet shrinkage, this trend looks set to continue, suggesting that the already measly supply forecasts for the year could be revised lower.

Deutsche Pfandbriefbank (Pbb) launched a €100m three year floating rate Pfandbrief on Tuesday, but syndicate bankers are sceptical that the euro market will manage much more before Easter. The storm around Cyprus may have subsided, but it has reminded issuers how quickly markets can turn and highlighted the value of covered bond collateral.

The irony, for a country committed to prescribing continued austerity in southern Europe, is that Germany probably has an Italian to thank for an economic outlook that is almost impossibly bright.Philip Moore reports.

Nobody would suggest Germany is enjoying its best economic performance, but it remains the outperformer of the eurozone and its most important engine. Chris Wright examines how sustainable this position of strength is.

Germans know the score: they might not want to pay for problems in Europe but the alternative — eurozone break-up — would be far more costly. Meanwhile, the politicians have realised that to preserve the euro, Germany has had to become Europe’s leader — a position that, given the country’s history, makes many citizens uncomfortable. Chris Wright reports.