Germany

Issuers could this week see any plans for issuance frustrated by competition within the covered bond market and also from the senior unsecured market, with spreads coming under pressure from both quarters. However, that is not stopping a wide array of names seeking out the smallest opening and this week has already seen more supply attempted in the same buckets as last week.

Bayerische Landesbank has priced a three year public sector Pfandbrief at 1bp over mid-swaps, the tight end of 1bp-2bp over guidance. Meanwhile Eurohypo completed up its Eu1bn deal and, according to the issuer, its expected benchmark mortgage Pfandbrief issuance for the year.

Bayerische Landesbank opened books on a three public sector Pfandbrief benchmark this (Thursday) morning as Eurohypo was closing books on a Eu1bn five year mortgage backed jumbo. However, the two projects were sufficiently different for the two to progress smoothly.

Skandinaviska Enskilda Banken closed books on the first post-holiday benchmark this (Wednesday) morning, but its execution gave little cause for celebration. The potential for competing issuers’ plans to clash in what is expected to be a busy period has also been made clear, with negative implications for spreads.

Münchener Hypothekenbank could open the post-summer primary market, having mandated BNP Paribas, Commerzbank, DZ Bank and UniCredit Group for a public sector jumbo Pfandbrief to be launched in the coming weeks. The fate of the deal could set the tone for the early autumn issuance season.

DekaBank is planning to enter Luxembourg’s lettres de gage market to give itself greater financing options than are available under Germany’s Pfandbrief Act. The bank has made hires from Depfa Bank and DG Hypothekenbank to staff its operation in the Grand Duchy.

The Association of German Pfandbrief Banks’ plan for market-making to be resumed in September provoked some strong reactions when it was announced last week. The Cover this (Tuesday) morning spoke to vdp executive director Louis Hagen about the association’s subsequent discussions with market-makers.

The Association of German Pfandbrief Banks (vdp) has told banks that it expects them to resume inter-dealer market-making on 1 September, quoting prices for tickets with a minimum size of Eu15m at triple normal bid/offer spreads for jumbos of two years or longer, irrespective of spread level. The move represents a break from common standards with the European Covered Bond Council and runs counter to many of the arguments against fixed market-making standards that have been made in the past year.

Depfa Deutsche Pfandbriefbank priced its second benchmark of the year at the tight end of guidance yesterday (Tuesday) afternoon, taking advantage of thorough groundwork to turn around its Eu2bn as quickly as possible. Depfa’s attentions will turn to potential public ACS issuance in the second half.

Depfa Deutsche Pfandbriefbank rolled back the years this (Tuesday) morning, attracting more than Eu4.5bn of orders for a new two year public sector Pfandbrief. The deal should be priced this afternoon at the tight end of guidance.

Banco BPI opened books on its first covered bond this (Monday) morning, surprising many market participants who had expected the weak tone in the credit markets and summer holidays to dampen issuance. However, even more supply could emerge, with a public sector Pfandbrief being soft-sounded.

Fitch today (Wednesday) said that the draft amendment to the Pfandbrief Act has failed to adequately address the issue of liquidity gaps, which are the most important driver of differences in Discontinuity Factors (D-Factors) assigned by the rating agency to covered bond programmes.