Germany

Berlin Hannoversche Hypothekenbank (Berlin Hyp) will issue a jumbo mortgage Pfandbrief in the summer, after a tender of four public sector backed trades that will help support an increase in the overcollateralisation of its mortgage cover pool, the issuer told The Cover.

Primary supply slowed on Thursday as poor peripheral data helped increase volatility, though the market has €3bn in successful benchmark supply to digest. Berlin Hannoversche Hypothekenbank Aktiengesellschaft (Berlin Hyp) announced a tender of four public sector backed Pfandbrief trades, following a well received public sector backed deal from UniCredit Bank Austria.

Landesbank Hessen-Thüringen (Helaba) sold Germany’s first jumbo covered bond in almost a year, and the first public sector backed benchmark of 2012. It also enjoyed the largest foreign participation in any German deal this year, and told The Cover it could return with a second trade if conditions are favourable.

Germany’s Helaba broke ranks with cautious covered bond issuers on Tuesday to launch the first euro benchmark trade for two weeks. The rare borrower found strong demand for a €1bn public sector backed transaction, and another deal out of core Europe is expected on Wednesday, said syndicate bankers.

Hopes for imminent covered bond issuance dimmed on Monday as the asked for stability proved elusive. With government spreads still widening and background volatility persistent, even top issuers will have to offer positive new issue premiums to compensate buyers, said syndicate officials.

The European covered bond market is stabilising on Friday, with buyers reported in French and Scandinavian names. But the Spanish market remains shaky, and though selective bids returned the macro sovereign backdrop deteriorated after Thursday's brief impovement.

Covered bond supply should restart next week given a stable opening, said syndicate officials on Friday, and several issuers are looking to launch trades. But with upcoming elections in France and the market still full of uncertainty after the renewed volatility of early this week, headline risk could keep second quarter supply muted.

German ship financing banks have been roadshowing in the US to boost their Schiffspfandbriefe investor base but the industry is unlikely to attract a new investor base soon, said market participants.

Covered bond issuance in the first quarter of 2012 was the second busiest ever for the first quarter. Though euro-denominated issuance fell by 45%, this was offset by a large rise in volumes of other currencies such as sterling, dollars and Australian dollars.

The assets that public sector Pfandbrief issuers select as collateral have become more important, according to Moody’s. As concern around peripheral eurozone sovereigns mounts once again, the rating agency reported that some programmes have increased their exposure to peripheral countries and to assets in sub-investment-grade countries.

Investors are fed up with focusing too much on the strength of issuing banks to value covered bonds. Now they are demanding more details about the underlying assets. But baring all is not necessarily the solution for borrowers either.

HSH Nordbank made a strong return to covered bonds on Thursday, drawing such strong demand — over 100 accounts participated in the €500m no-grow trade — that leads closed books after only 35 minutes.