The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

JPMorgan trades Pfandbrief credit derivatives

Help could be at hand for market makers in jumbo Pfandbriefe that want to hedge spread movements between different issuers.

While the travails of AHBR put the spotlight back on liquidity in the jumbo Pfandbrief market last month, JPMorgan was trading the first Pfandbrief credit derivative. The derivative references an issuer’s public sector or its mortgage Pfandbriefe, and is triggered by a failure to pay on any of these bonds, which are physically deliverable.

“Unlike some other credit derivatives backed by securities, such as CDS of ABS, this trade is quite simple,” says JPMorgan’s Michael Poppel, vice-president in financial institutions derivatives marketing. JPMorgan is not saying which name its first trade was written on, although it is not AHBR.

No default

Pfandbrief investors are not obviously in need of credit protection. Famously, there hasn’t been a Pfandbrief default in the product’s 236-year history. “There are always protection sellers,” says Poppel. But there are also potential buyers.

First, some derivative dealers use Pfandbriefe as cash collateral when they transfer risk into funded synthetic CDO SPVs. This effectively exposes them to counterparty risk in the shape of the Pfandbrief collateral, which they need to hedge.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree