Germany

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.

Heterodoxy is all the rage. Fashion rules. But the world needs the nagging, nurturing, normality of the Bundesbank more than ever before, writes Andrew Capon.

At first glance, German banking is in decent shape. Set within eurozone’s healthiest economy, the country’s three pillar banking system, once condemned as stodgy and old-fashioned, looks a smart way of guaranteeing diversity of lenders and ensuring nationwide coverage. Two pillars (or at least one and a half) are performing strongly, while the third is headed by a genuine national champion. But weak capital, declining margins, higher funding costs, a growing regulatory burden and a hostile political environment cloud an otherwise benign picture, reports Julian Lewis.

If debt management offices were cars, Germany’s Finanzagentur would be more Volvo estate than BMW convertible. Methodical and dependable, and good in a crash, the finance agency is Europe’s most predictable borrower. Germany would have it no other way — although investment bankers are crying out for more syndicated deals. Philip Moore reports.

If any set of borrowers has an access all areas pass to the capital markets party, it is Germany’s public sector credits. The Bund remains Europe’s de facto benchmark security and, along with the agencies that the federal republic also guarantees, is enjoying a period of sustained low yields and tight spreads. None of that looks set to change as the number of triple-A ratings around the globe dwindles. But that is not to say that German public sector funding officials can put their feet up and watch the cash roll in. KfW continues to help develop new markets, such as the offshore renminbi market, while the German Finance Agency has a new head, Tammo Diemer, who is taking over at a time when German finances are at the heart of Europe’s economic health. Diemer and KfW’s Frank Czichowski, along with senior capital markets bankers, joined EuroWeek in mid-March to discuss the German public sector bond markets.

In spite of Germany’s well developed support system for the federal states, investors clearly do not believe that the 16 Länder share the same credit quality, meaning that the funding status quo will remain broadly in place, with the weaker states accessing the market through pooled jumbo issues and the stronger borrowers issuing on a standalone basis. Unless of course, the German finance ministry changes its mind and endorses the Deutschland Bond concept. Stranger things have happened — even in Germany. Philip Moore reports.

German public sector borrowers have had a whale of a crisis. Indeed it is hard to find a point along the German sovereign’s curve at which an investor won’t have to pay, in real terms, for the privilege of funding Europe’s biggest economy. Ralph Sinclair discovers why that trend is set to continue.