Germany

Apparently gentlemen prefer blondes but marry brunettes. Well from a performance perspective, investors should buy covered bonds from more volatile jurisdictions in the short run and then dump these for more stable products in the secondary market.

The UK government’s extension of guarantees relating to Northern Rock obligations on 18 December was seen as good news for covered bondholders. Moody’s downgraded Northern Rock’s bank financial strength rating from D+ to E+, but said that the extension “further underpins the Aa3 bank deposit and senior debt ratings”.

Deutsche Postbank finishes the roadshow for its debut jumbo mortgage Pfandbrief tomorrow (Friday) and could be one of the first issuers into the market in the New Year. Marcus Chromik, head of primary capital markets at Postbank, told The Cover that with everyone hoping that high quality credits will reopen the market, Postbank could deliver just what the market is looking for.

HSH Nordbank has been stressing the mobility of the collateral of ship Pfandbriefe on the roadshow for its first benchmark. Whereas housing is susceptible to the economic ebbs and flows of its location, argues the issuer, ships can go wherever favourable winds blow.

HSH Nordbank has completed the European roadshow for the first euro benchmark ship Pfandbrief and, surprisingly, eschewed vague remarks on a launch date and instead attempted to book a slot in what is expected to be either a busy or a very difficult January for issuance. Meanwhile AIB Mortgage Bank raised Eu175m through a tap of its 2017 issue.

Deutsche Postbank has announced the launch of its Pfandbrief debt issuance programme, arranged by Citi. The programme will include both mortgage Pfandbriefe and public sector Pfandbriefe.

The prospect of the Pfandbrief Act being amended to raise the limit on the loan-to-value ratios of German residential mortgage collateral from 60% to 80% looks set to go the same way as the proposal to allow RMBS to be included in cover pools. As one investor said: “This would be the stupidest time to do that.”

The spectre of the market being split into “core” and “non-core” jurisdictions with different market-making conventions was raised by one leading covered bond investor today (Friday), following the general suspension of interdealer commitments on Wednesday.

Moody’s has upgraded the mortgage Pfandbriefe of Eurohypo from Aa1 to Aaa, offering some rare good news in this week’s turbulent market. The move was widely anticipated since the rating review was initiated in May, coming with changes to the rating agency’s methodology and an upgrade to the issuer to A1.

Bayerische Hypo- und Vereinsbank could breathe a sigh of relief today (Tuesday), pricing its Eu1bn five year mortgage Pfandbrief in the middle of 3bp over mid-swaps guidance just before the primary market appeared to close for new issuance.

HVB was said to be weathering the storm in the covered bond market reasonably well today (Monday), having built a book of Eu1.5bn for a deal limited at that size at guidance of 3bp over mid-swaps. Investors put its success down to German issuers’ domestic support.

NordLB this (Thursday) morning priced its first jumbo Pfandbrief issue since Landesbanks lost their state guarantees in July 2005, a Eu1bn March 2012 public sector Pfandbrief that is one of the most tightly priced issues since the summer.