Germany

The German financial supervisory authority, BaFin, said at last Thursday’s European Covered Bond Council plenary session that it is very much against the introduction of aircraft Pfandbriefe, according to Deutsche Bank research.

SEB AG priced its Eu1bn two year public sector Pfandbrief at 7bp through mid-swaps this morning, but some syndicate officials involved warned that similar issuers should not follow the bank’s example of using the retention format, particularly if the turmoil elsewhere in the covered bond market finally infects the German product.

SEB AG popped up with a Eu1bn two year public sector Pfandbrief today (Thursday), showing that German issuers can even go so far as to launch retention deals in today’s market. Meanwhile, Berlin-Hannoversche Hypothekenbank’s final allocations showed that two thirds of its paper was placed domestically.

Berlin-Hannoversche Hypothekenbank shrugged off the turbulent markets to build an oversubscribed book for its mortgage backed jumbo this morning, with March looking set to follow February’s picture of a primary market where Germany and the top French names hold sway.

With expectations of Spanish and UK supply for 2008 having been slashed, the market looks set to rely on three areas to support high supply forecasts for the year: France, Germany and new entrants. The Cover asked analysts whether the first two months of the year have led to any revisions to their estimates for the market in general and the two core jurisdictions in particular.

The covered bond market endured a rocky morning today, with spreads widening alongside heavy falls in equities, giving the European Covered Bond Council further food for thought ahead of its meetings in Milan later this week. But Germany could once again prove the exception in the primary market.

In light of press reports on the Association of German Pfandbrief Banks’ views on potential changes to market-making, and ahead of next week’s European Covered Bond Council meetings where the Packmohr Plan will be centre stage, The Cover spoke exclusively to Louis Hagen about the vdp’s stance.

Barclays Capital’s analysts have slashed their forecasts for benchmark issuance in 2008 by Eu40bn, from Eu190bn to Eu150bn, lower than any bank was expecting only two months ago.

The Association of German Pfandbrief Banks (vdp) was promoting the Pfandbrief under the banner “Investment without side effects” at the Euromoney Bond Investors Congress yesterday (Wednesday), but not everyone was convinced that covered bonds themselves had avoided the hangover from the subprime crisis.

The Association of German Pfandbrief Banks (vdp) is understood to be putting its weight behind calls for the introduction of an electronic trading system with an initiative of its own, and some market-makers are said to have already indicated a willingness to go ahead with such a plan, with the pay-back that they would be set to be rewarded with the lion’s share of mandates were the move to go ahead.

With German public sector issuers returning in style this week, mortgage Pfandbrief and Scandinavian issuers are being tipped as likely successors in a market where the well stocked pipeline is as much a list of those that can’t access the market as a guide to who will be next. Indeed the problem for the primary market is that it looks like those that could issue won’t, and those that would issue can’t.

Depfa priced the largest benchmark for Deutsche Pfandbriefbank in seven years yesterday (Wednesday) afternoon, a Eu2bn deal that is also the German unit’s first benchmark since June 2005 and the largest public sector Pfandbrief issue so far this year.