Germany

Hypo Real Estate International’s Eu1bn two year mortgage Pfandbrief earlier this week showed the new realities facing German issuers today, but the issuer yesterday (Wednesday) told The Cover that it was not unduly concerned about the situation. Meanwhile, the HRE group is being courted by a JC Flowers-led consortium.

Hypo Real Estate International (HRE) priced a Eu1bn two year Hypothekenpfandbrief yesterday (Tuesday) afternoon at 9bp over mid-swaps on the back of a book dominated by domestic accounts, taking the first steps to locating the new space occupied by German mortgage backed deals.

Price guidance touching the double-digits over mid-swaps for Hypo Real Estate International’s two year mortgage Pfandbrief this morning showed that even German credits cannot escape the new demands being placed on covered bond issuers today.

Bayerische Landesbank achieved one of the highest international distribution numbers for a jumbo Pfandbrief since last summer, placing around two-thirds of its Eu1.5bn long three year public sector backed deal outside Germany when the issue was priced on Friday.

BayernLB is expected to price a new three and a half year benchmark sized public sector Pfandbrief today, after opening books yesterday (Thursday) after the European Central Bank's decision to hold rates stable. The leads were able to increase the size of the deal after books were left open overnight for orders from Asia.

The Dexia group on Wednesday demonstrated the diversity of funding options it enjoys, adding a jumbo Pfandbrief to its issuance this year. The Eu1.5bn two year issue nevertheless showed the limits of what issuers can achieve in today's market. (Updated to include quotes)

The Dexia group yesterday (Wednesday) demonstrated the diversity of funding options it enjoys, adding a jumbo Pfandbrief to its issuance this year. The Eu1.5bn two year issue nevertheless showed the limits of what banks can achieve in today’s market.

The book has been closed on Dexia Kommunalbank’s Eu1.5bn two year public sector Pfandbrief this morning, with pricing set to follow this afternoon. The deal maintained the Pfandbrief’s strong performance by avoiding pricing above mid-swaps on the back of a strong order book.

With the primary market shut to new issues tap dancing looks set to come back into fashion. Dexia Municipal Agency and Münchener Hypothekenbank have led the revival over the last week, with both increasing outstanding public sector deals.

With the primary market shut again after ING wriggled through a brief opening last week, the covered bond market has been casting about for likely candidates to re-open it after the Easter holiday. The wide range of mandates outstanding — some of them from last year — is proving an obstacle to identifying the market’s white knight.

The strength of an issuer’s domestic investor base has emerged as a key determinant of covered bond spreads since the crisis began last summer. Those that benefit have been able to relax, while those reliant on foreign investors have redoubled their efforts to penetrate new pockets of money.

The spread between obligations foncières and other French covered bonds has underlined the power of legislation, and the UK hopes its own new framework will pay off. But recent developments suggest a more complicated picture. The Canadian regulator, for one, has yet to be won over, and structured issuance in Germany has finally emerged.