Newcomers to the herd
It used to be hard to find anyone in the financial markets prepared to criticize the Pfandbrief. Analysts would continually extol the virtues of the second-largest bond market in Europe for its generous yield pick-up on German government bonds, for having the backing of practically risk-free loans to the German Länder (states) or to a pool of high-quality mortgages, and for not having suffered a default this century.
The only shortcomings mentioned were its lack of liquidity and transparency. That meant it was characterized as something peculiar to the German domestic debt market. Deemed unsuitable for export, on average only 10% of the paper was sold to investors outside Germany.
The development of the jumbo Pfandbrief in 1995 was an attempt to change that. Any Pfandbrief issue of Dm1 billion ($649 million) or more offering a fixed rate of interest and with at least...
