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French Pfandbriefe - Nouvelle et supérieure

It didn't take long for France to notice the success of Germany's market in euro Pfandbriefe. In June, lawmakers in Paris copied and fine-tuned the German formula that investors love. But unlike Germany's Hypotheken and Landesbanks, the French issuers of obligations foncières don't rely on interest-rate punts to make a profit. French Pfandbriefe work how the German original was supposed to. Marcus Walker reports

    Five triple-A bonds issued in October marked the birth of a competitor to Germany's euro Pfandbrief market. Three of them, issued by a specially created bank called Compagnie de Financement Foncier and together raising e5.2 billion, were collateralized by a portfolio of mortgages. The other two bonds, of e1.25 billion each, were backed by loans to French local government. Their issuer was Dexia Municipal Agency (DexMA), another freshly established institution.

Behind the first issuer stood Crédit Foncier de France (CFF), the country's largest mortgage lender. The second issuer was a vehicle for Crédit Local de France (CLF), part of the Franco-Belgian banking group Dexia.

CLF's director of market operations is Jacques Bellut; he likes to measure his bonds against Deutsche Pfandbriefbank (DePfa), which he considers the best Pfandbrief issuer. So is the French version better? Bellut says: "In terms of risk, yes. In terms of liquidity, not yet. Our bonds are still too new, too small compared to DePfa."

It's expected that up to seven other issuers could join in during 2000. So far, the market doesn't have the liquidity of the e1 trillion Pfandbrief sector.

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