Germany

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.

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.