Germany

Although the government guaranteed bank bond sector is maturing in the UK, the impact of broader issuance on the rest of the fixed income market has yet to fully play out, with the sovereign, supranational and agency sector throwing up new pricing surprises and some countries just beginning to gear up for issuance. Another shocking level appeared on screens only this (Monday) morning.

The mighty Pfandbrief has finally fallen victim to the problems suffered by other asset classes in the international capital markets. With volatile spreads, a lack of liquidity and worries over the futures of some issuers, the situation looks bleak. Nonetheless, Brendan Daly finds that this has not dented the confidence and optimism of market participants. From EuroWeek’s Germany in the Capital Markets supplement.

DVB Bank, which specialises in international transport finance, is working on a ship Pfandbrief programme. The bank will also be looking at how the new asset class of Flugzeugpfandbriefe develops.

NIBC Bank has completed the transfer of German residential loans to its cover pool, which led Fitch to affirm the Dutch bank’s covered bonds at AAA today (Wednesday). [Story corrected to reflect completion of transfer.]

Commerzbank is turning to German stabilisation fund SoFFin for a support package that includes the provision of up to Eu15bn of guarantees for funding, and HSH Nordbank is seeking up to Eu30bn of guarantees. The announcement of Commerzbank’s news was accompanied by the first details on fees for the guarantees.

Hypo Real Estate group is understood to have boosted the level of overcollateralisation for the mortgage cover pool of HRE Bank AG enough to avert a multi-notch downgrade by Fitch of the corresponding Pfandbriefe.

Fitch today (Thursday) affirmed the long term individual default ratings of several German Landesbanks and of Deutsche Postbank, citing the high potential of support from the banks’ owners in the event of need. However, some are already turning to the central government as well as local owners to shore up their capital and funding.

Hypo Real Estate yesterday (Tuesday) applied to the German Financial Markets Stabilisation Fund (SoFFin) for a guarantee for a planned Eu15bn liquidity facility from the Bundesbank to cover the group’s short term liquidity requirements. In addition, HRE today (Wednesday) announced that it will seek additional support from the Stabilisation Fund, which may involve capitalisation measures.

Fitch has held off taking action on Hypo Real Estate Bank AG’s Pfandbriefe to give the bank more time to address the rating agency’s concerns. The bank yesterday (Thursday) afternoon said that it was maintaining its rating watch negative on the covered bonds since it had said two weeks ago that it would be taking action as a result of its review this week.

After the outcry over Moody’s two covered bond downgrades on Tuesday, The Cover spoke to the rating agency to find out the thinking behind them. But rather than focus on its much-discussed timely payment indicator, Moody’s instead offered a refresher course on other elements of its methodology.

Not for the first time this month, analysts have been trying to get to grips with Moody’s rating actions, this time the downgrade of Depfa ACS Bank’s public sector covered bonds and Hypo Real Estate Bank International’s mortgage Pfandbriefe yesterday (Tuesday). Affecting more than Eu50bn of outstanding covered bonds, the downgrades are the most significant in the market since the crisis struck in summer 2007, but one analyst even called them irresponsible.

The German government committed to safeguarding the functioning of the Pfandbrief market should this become necessary when announcing its rescue package for German banks yesterday (Monday).