Pfandbrief: After 200 years, it’s come to this

European government guarantee packages: Guaranteed to confuseThe sincerest form of flatteryIT IS COMMONLY impressed on investors that in more than 200 years of existence, the German Pfandbrief, the benchmark of the modern covered bond world, has never experienced a single case of default. This is not just a fact that is trotted out for marketing purposes in the same way that, say, a hedge fund might boast that none of its investments had lost money. The Pfandbrief’s perfect record is, rather than merely an affirmation of its strict safety regulations, an integral part of its make-up. Protection from default is not so much a priority as a purpose. Measures to safeguard the Pfandbrief holders of an insolvent issuer are comprehensive, and as a result there has never been a case of failure. There has also never, in more than 200 years, been a case of the German government having to...