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Capital Markets

Covered Bonds: Pfandbrief keeps new issue levels buoyant

Looming implementation of the EU Prospectus Directive is adding momentum

As the jumbo Pfandbrief celebrated its 10th birthday, a healthy June deal pipeline promised to help keep FIG issuance bubbling and support overall primary market volumes. Bankers predict around €20 billion of covered bond issuance this month, with smaller, illiquid deals adding €3 billion to the total. Nearly half of that supply will come from Germany.

At the time of writing, Bayerische Hypo-und Vereinsbank (HVB) was planning a rare public sector Pfandbrief and was aiming to issue between €1.25 billion and €1.5 billion. Another keenly anticipated issue, from Deutsche GenossenschaftsHypothekenbank (DG Hyp) was due to price on June 6. DG Hyp opened the jumbo market in January this year with its €2 billion 2012 deal. Düsseldorfer Hyp and Essen Hyp had also announced euro benchmark issues for June.

"There is added momentum because of the looming implementation of the EU Prospectus Directive and because the market looks more resilient than a couple of weeks ago," says Thomas Cohrs, head of origination, financial institutions DCM at HVB. It's not yet clear precisely how Germany will implement the prospectus directive, and Pfandbrief issuers have rushed to the primary markets to issue under the old regime. "And for psychological reasons, issuers want to get covered bonds into the market before the new Pfandbrief law takes effect," adds Cohrs. 

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