Securitization, German-style
The explosion of public (öffentliche) Pfandbrief issuance in the last two years is one of the most intriguing developments in the international capital markets. Investors get a spread to Bunds on paper that in many cases is effectively state-backed. The issuers make a positive spread between the assets that back the Pfandbriefe and the Pfandbriefe themselves: this is despite the fact that at the time they purchase the collateral it yields less than the yield that investors would demand in the Pfandbrief market. And the original borrowers are content to issue illiquid domestic instruments of no interest to foreign investors despite the obvious international demand for their credit. ...
