Germany

KfW and Swedish Export Credit Corporation (SEK) achieved strong results in sterling on Tuesday despite extremely volatile conditions in the currency as a result of uncertainty around the impact of Brexit and the rising cases of coronavirus in the UK, which has affected swap spreads and the cross-currency basis swap for non-UK borrowers.

Schuldschein bankers want to make sure last year’s drop in international borrowers was a temporary symptom of the coronavirus pandemic. But with restrictions on travel as well as government support programmes rolling into this year, there is little optimism that non-German issuers will return soon.

Aareal Bank priced the first covered bond of the year flat to its curve and, unusually, the first leg of the swap payment was priced below the European Central Bank’s deposit rate of minus 0.50%. Even so, the bonds attracted good demand.

Berenberg has strengthened its investment banking division with two senior hires, the latest in a series of appointments it has made.

The European Investment Bank became the first borrower to tap the sterling market in 2021 on Monday, while KfW is set to follow on Tuesday. While the opening deal went well, the issuers had to contend with some sharp volatility.

Public sector borrowers wasted no time in getting back to business in the euro market in 2021 with one live deal and four mandates all hitting screens on Monday as issuers look to take advantage of an almost full trading week and a supportive market to make a dent in their brand new funding programmes.

Germany will remain one of biggest covered bond issuance regions, accounting for up to a fifth of European supply next year. The residential real estate market and economy are expected to remain resilient and, along with robust investor protection built into Pfandbriefe, the market is well buttressed — even when it comes to riskier commercial real estate exposures.

Fondo Gomma Plastica, Fopen, Pegaso and Previmoda are looking for a direct lender to manage just under €200m of capital, in a push for higher yielding assets.

The MTN market has had a tough year, as central bank support programmes and rampant public market issuance ate away at the volume done in private markets. Most notable was the 42% decline in bank issuance, which made up the majority of the year’s fall in MTN volume.

FMS Wertmanagement, the Germany’s winding-up institution for the nationalised Hypo Real Estate Holding AG, will need to borrow a much smaller sum from public bond markets next year as a result of an increase in direct long-term euro funding from Germany’s Financial Market Stabilisation Fund (SoFFin).

No two crises are the same, and to expect financial instruments to behave in the same way in each one would be unfair and naïve. But having proved their mettle in the 2008 crisis, the Schuldschein and USPP markets seemed well placed to thrive in 2020. Not so. Instead, it was the turn of direct lending to shine. Silas Brown reports.

Germany is looking to issue more syndicated deals and green bonds next year to finance an even bigger funding programme as a result of the coronavirus pandemic.