Germany

In brief: As The Cover was going to press, Moody’s was announcing downgrades to two classes of covered bonds of Hypo Real Estate group, including Depfa. It cut Depfa ACS Bank’s public sector asset covered securities from Aaa to Aa1 and HRE Bank International’s mortgage Pfandbriefe from Aa2 to Aa3.

The level of support banks can expect from their owners or governments was key to rating actions made by Fitch and Standard & Poor’s in the past 24 hours, as rating actions continued on covered bond-issuing members of groups that have been at the centre of the past fortnight’s emergency rescue packages.

Moody’s, Standard & Poor’s and Fitch yesterday (Tuesday) took rating actions on the covered bonds issued by Hypo Real Estate group entities following its bailout with a Eu35bn credit facility from the German government and banking industry on Monday. [Updated to correct existing Moody's ratings.]

Dexia today (Tuesday) received a Eu6.4bn equity injection from governments and other shareholders after the group’s shares fell almost 30% yesterday (Monday). After a trading suspension was lifted this morning the stock rallied around 20%.

Bo Heide-Ottosen, the Hypo Real Estate Holding and Depfa board member central to the group’s treasury and public finance activities, has left the group in the wake of its rescue by a consortium of German banks and the German government.

The credit and (il)liquidity crisis struck Europe with a vengeance today (Monday), as the UK government took over Bradford & Bingley’s loan books and wholesale liabilities, Fortis was part nationalised by the Benelux governments, and Hypo Real Estate was forced to turn to the German government for funding.

In brief: Deutsche Kreditbank has joined the Association of German Pfandbrief Banks, effective 1 August.

The Association of German Pfandbrief Banks has scheduled a meeting for this Thursday afternoon to discuss inter-dealer market-making after its resumption last week went worse than the association had expected. [Updated to correct extent of widening.]

Dexia Kommunalbank pulled a planned public sector jumbo Pfandbrief yesterday (Monday) afternoon after failing to generate sufficient demand, in a blow to the German sector, particularly given that it came on the day that inter-dealer market-making commitments had been resumed at the behest of the Association of German Pfandbrief Banks.

The announcement of Commerzbank’s takeover of Dresdner overshadowed changes at Eurohypo that were announced yesterday (Monday), with a new chairman being appointed and a sharp reduction in the issuer’s profile in the jumbo market being revealed.

Dexia Kommunalbank gave the jumbo Pfandbrief market its first test since inter-dealer market-making commitments were resumed this (Monday) morning. Spreads were wider than on Friday, as expected, but the medium term outlook was unclear.

Münchener Hypothekenbank achieved sub-Libor pricing on a Eu1bn three year public sector Pfandbrief launched yesterday (Monday) morning, taking advantage of its rarity and careful approach to the market to score a tighter result than its peers.