Germany

Deutsche Hypothekenbank was set to price a €500m five year mortgage backed Pfandbrief early on Tuesday afternoon from an order book of close to €600m. The deal was modestly oversubscribed, compared with Aareal Bank’s five year on Monday, but it was an improvement on Deutsche Hypo’s previous outing last September.

Aareal Bank has issued the first Pfandbrief of the year, attracting a comfortably oversubscribed book and pricing flat to its curve. Despite the appetite for high yielding risk, the deal showed that there is still plenty of appetite for core covered bonds, ­even if they are backed a high proportion of commercial loans from outside Germany.

Time is running out for borrowers yet to make programme changes in advance of Standard & Poor’s new counterparty criteria, which comes into force in early January. The rating agency has placed another six programmes on review for downgrade, and warned there could be others.

After nearly 30 years with Bayerische Landesbank (BayerLB), Peter Mittermayer, head of covered bond syndicate, will retire at the end of this week.

This week Commerzbank unveiled a highly rated SME structured covered bond. It offers tremendous hope for the revival of the European economy, as it suggests banks have a way of financing this crucial sector with capital market funding.

The development of the covered bond market took a leap forward this week when Moody’s and Fitch assigned a provisional double A rating to Commerzbank’s €5bn SME-backed structured covered bond programme.

The coupon on Münchener Hypothekenbank's two year Pfandbrief priced on Monday was just 0.125%, confirming investor perception of the issuer as a “surrogate” for German government bonds, deputy head of treasury Claudia Bärdges-Koch told The Cover.

This week’s trades from Terra Boligkreditt and Landesbank Hessen-Thueringen (Helaba) performed well in the secondary market on Wednesday. However, the lower rated Norwegian deal shone brighter, paying testimony not only to the strength of the jurisdiction and collateral but also to Terra’s exceptional marketing effort.

Landesbank Hessen-Thueringen Girozentrale (Helaba) on Tuesday became only the second issuer in four years to price a benchmark covered bond through mid-swaps.

HSH Nordbank has taken the unusual step of using a synthetic securitisation that frees up no regulatory capital at all. Instead, the credit protection provided by KfW on a portfolio of SME loans means they can now be used as collateral in HSH’s public sector Pfandbriefe — the bank’s most important source of term funding.

Bankinter on Thursday swiftly followed peripheral peer UniCredit’s success from the day before. The Spanish borrower launched a blow-out three year benchmark trade 20bp inside initial price thoughts, as traders struggled to keep up with a big spread rally in peripheral paper.

Investor sentiment towards Spain and Italy has improved since August, according to a Crédit Agricole survey. However, most buyers’ credit lines are unchanged, which means many still cannot take advantage of remarkable relative value.