20 2 20 FR - NORD/LB - NORD/LB...2016/08/31 · Find us on Bloomberg: NRDR Issue volume –...
Transcript of 20 2 20 FR - NORD/LB - NORD/LB...2016/08/31 · Find us on Bloomberg: NRDR Issue volume –...
Please see important disclosure on the last pages.
2
Agenda Page
Market overview 2
Commerzbank: review after pool transfer 5
Savings bank Pfandbriefe in the second quarter of 2016 9
Debt brake? – no problem; budget surplus in the first half 12
ECB tracker 13
Charts & Graphs 18
Publication overview 24
Contacts 25
Find us on Bloomberg: NRDR <GO>
Issue volume – Covereds Issue volume – SSA
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EU
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AUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPTSESGTR
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EU
Rb
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Other
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Source: Bloomberg, NORD/LB Fixed Income Research Source: Bloomberg, NORD/LB Fixed Income Research
Fixed Income Research
Covered Bond & SSA View 31 August 2016 34/2016
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 2 of 29
Covered Bonds Market overview
Analyst:
Matthias Melms, CIIA, CCrA
Further bonds placed at the
long end
Two further covered bonds have been issued on the primary market in the
past five trading days. The trend towards placing bonds at the long end was
maintained, with UniCredit Spa and DNB issuing papers that featured matur-
ities of ten years. Consequently, all bonds in August were issued at the long
end of the curve, which is in our opinion due to the fact that ever more inves-
tors are seeking bonds that still offer a positive return in the present climate.
In total, the issue volume in August now amounts to EUR 5.3bn. Although
the issue volume is therefore higher than in previous years (2015: EUR
4.8bn; 2014: EUR 0.0bn), it is slightly below the average for the past six
years of EUR 5.7bn. With a term of ten years, the Norwegian DNB also opt-
ed for a maturity at the long end of the curve. Demand for this bond was high
among investors, as a result of which the issue volume was set at EUR
1.5bn. The reoffer spread was also a contributing factor, and, fixed at
ms +3bp, equating to a new issue premium of approximately 5.5bp against
the interpolated secondary market curve. In our opinion, this bond therefore
offers further performance potential. UniCredit placed a EUR 1.0bn bond
from its CPT programme that will mature in October 2026 on the market.
UCGIM 0 3/8 10/31/26 was met with strong interest, which is reflected in the
bid-to-cover ratio of 2.0. When compared with bonds of comparable maturi-
ties in the previous week (CMZB 0 1/8 12/15/26, WLBANK 0.1 08/31/26), the
reoffer spread of ms +20bp means the pick-up is 36bp and 37bp, respective-
ly.
Banca Popolare Emilia Issuer Country Timing ISIN Maturity Volume Spread Rating
DNB Boligkreditt NO 30/08/16 XS1485596511 10y € 1.5bn ms +3bp - / Aaae / -
UniCreditSPA IT 24/08/16 IT0005212987 10.2y € 1.0bn ms +20bp AA+E / - / -
Source: Bloomberg, NORD/LB Fixed Income Research (rating: Fitch/Moody’s/S&P)
NAB seeking approval for
conversion to soft bullet
With National Australia Bank (NAB), a further issuer is now seeking approval
to convert the structure of their existing covered bonds from hard bullet to
soft bullet, with the option to implement a 12-month extension period. Credi-
tors of the bonds NAB 2 5/8 01/13/17, NAB 5 12/20/21, NAB 1 7/8 01/13/23
and NAB 3 09/04/26 are being called on to grant their approval for the con-
version by 9 September. If at least two-thirds of the nominal volume is pre-
sent at the meeting of creditors on 14 September and approval is granted, a
premium of 0.05% will be paid. NAB has been issuing bonds with an exten-
sion option since 8 March 2013, but all covered bonds issued to date have
had a hard bullet structure.
Trader’s comment The bank holiday in the UK had an impact on the market at the start of this
week, with only few sales evident. The trend of the last two weeks has con-
tinued and investors were generally active on the seller side, without any
spread widening occurring as a result. Inventory remains at a very low level,
indicating that there is still positive interest in this area. Bonds issued in the
previous week achieved slight gains on the secondary market and narrowed
versus swaps.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 3 of 29
SSA Market overview
Analyst:
Mario Gruppe, CIIA
Bund yields rise only briefly
following the Jackson Hole
meeting
Following the annual meeting of central bankers in Jackson Hole, Bund
yields initially rose slightly. This is likely to have been primarily attributable to
comments by some senior US central bankers, most notably Janet Yellen,
which were interpreted as a signal for a rate rise by the Federal Reserve in
the near future. The remarks by Vice Chairman Stanley Fischer may also be
interpreted to mean that the US central bank will raise rates this year. Ac-
cordingly, Treasury yields tightened slightly. In this environment, yields on
German government bonds also increased somewhat. In the meantime, ten-
year German government bonds returned yield of just over -0.04%, but rap-
idly lost ground again at the beginning of the week. However, in the short
term and a good week before the next meeting of the ECB Governing Coun-
cil, we do not expect any significant movement in yields on Bunds.
Parliamentary vote in Spain The fall in yields on Spanish government bonds is primarily attributable to
indications in recent weeks that the acting Prime Minister Mariano Rajoy will
shortly be able to form a government. Rajoy intends to stand for re-election
this week. Recently, the Conservatives obtained the support of the liberal
people’s party, Ciudadanos. To be sure, both parties together do not have
enough votes for an absolute majority; however, a simple majority would be
sufficient for Rajoy in a second ballot. This obviously presupposes that other
factions will abstain from voting or vote in favour, which is by no means cer-
tain. This would result in another stalemate, which would probably lead to
new elections for the second time in a year. There is little sign of anxiety on
capital markets in the meantime. The decline in yields that has been a fea-
ture of recent weeks has also continued. Meanwhile, there seems to have
been a degree of bottoming out at around 0.95% (10y). Apparently, market
participants first wish to wait for the outcome of the election. The first ballot
is set for this Wednesday. Should Rajoy fail to obtain an absolute majority
here, the second ballot will take place on Friday this week. If he fails to
achieve a (simple) majority then, the signs point towards a fresh round of
elections in autumn.
Summer break drawing
to a close
In recent weeks, the primary market experienced a veritable drought. How-
ever, this situation is not likely to persist. A glance at maturities shows that
there will be a substantial refinancing requirement in the SSA segment over
the next few months. Bonds amounting to more than EUR 10bn will mature
in September and October respectively, before maturities in the last two
months of the year fall back to around EUR 5bn per month.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 4 of 29
Primary market A Bundesland, namely NRW, again provided the only large EUR issue last
week. With a maturity of 25 years, this bond features the longest maturity
ever issued in benchmark format. Yet again, the issue underlines the fact
that issuers are using the current market environment to raise more very
long-term funding and secure favourable terms from their perspective for a
long period. Almost 50 investors placed orders for a total of EUR 850m,
meaning that NRW had no difficulties raising its target of EUR 750m. The
majority, a good 55%, went to asset managers, followed by banks (21%) and
insurance companies (16%). In addition to NRW, Lower Saxony and Rhine-
land-Palatinate ventured onto the primary market. Both Länder succeeded in
increasing existing bonds. At ms -15bp, the Lower Saxon tap (6/26) was
priced exactly the same as the Rhineland-Palatinate bond tap (08/26). BNG
also ventured onto the market with a tap (06/24) at ms -10bp.
Issuer Country Timing ISIN Maturity Volume Spread Rating
NRW GE 24.08.2016 DE000NRW0JV3 25.0y 0.75bn ms +10bp AAAe / Aa1e / -
Source: Bloomberg, NORD/LB Fixed Income Research (Rating: Fitch / Moody’s / S&P)
Trader’s comment EUR 750m NRW 08/41 was issued on the primary market at ms +10bp. The
attractive pricing resulted in spreads softening in the ultra-long maturity
segment. In contrast, spreads up to ten years were very stable. Demand
within the framework of the Eurosystem’s purchase programme was some-
what more subdued during the last week, with the result that sales were
somewhat lower overall.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 5 of 29
Covered bonds Commerzbank: review after pool transfer
Analyst:
Matthias Melms, CIIA, CCrA
Hypfra is being wound down
and stocks transferred
In May, Commerzbank announced that its wholly-owned subsidiary Hy-
pothekenbank Frankfurt AG (Hypfra, formerly Eurohypo) would be fully
wound down. As part of this process, the portfolio of Hypfra was fully trans-
ferred to Commerzbank. Hypfra itself has been transformed into a service
company (LSF, Loan Solutions Frankfurt) with the aim of further reducing the
portfolio of commercial real estate loans transferred to Commerzbank, oper-
ating mostly independently on behalf of Commerzbank. Furthermore, Hypfra
has relinquished its banking licence and Pfandbrief licence. In the course of
the transaction, all Hypfra's outstanding Pfandbriefe were transferred to
Commerzbank. Large portions of the private residential mortgage loans of
Hypfra have also been transferred into the cover pool of Commerzbank.
However, Hypfra's commercial real estate loans which were earmarked to be
run down were transferred to the cover pool. In the following, we will exam-
ine Commerzbank’s cover pool data as reported for the first half of the year
and identify the extent to which changes have occurred.
Overview of mortgage Pfandbrief pool – Commerzbank Group
Breakdown by size categories – mortgage Pfandbriefe
-5,000
0
5,000
10,000
15,000
20,000
Hypothekenpfandbriefe Cover Pool Overcollateralization
EU
Rm
Coba_Q2 Coba_Q1 Delta Hypfra_Q1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Coba_Q2 Coba_Q1 Delta Hypfra_Q1
more than 10 mn. Euros more than 1 mn. Euros up to 10 mn. Euros
more than 300,000 Euros up to 1 mn. Euros up to 300,000 Euros
Source: Issuers, NORD/LB Fixed Income Research Source: Issuers, NORD/LB Fixed Income Research
Reduction in mortgage-
backed cover pool
As at 31 March, Commerzbank’s mortgage-backed pool comprised a volume
of EUR 10,004.6m with outstanding Pfandbriefe of EUR 4,150.0m, while
Hypfra had a cover pool amounting to EUR 12.112m as against Pfandbriefe
of EUR 9,665m. By comparison, Commerzbank reported an outstanding
Pfandbrief volume of EUR 12,506m with a cover pool of EUR 17,411m as at
30 June. This data alone shows that the change in the mortgage-backed
pool and outstanding Pfandbriefe cannot be fully accounted for by the trans-
fer of all Hypfra’s cover assets and Pfandbriefe to Commerzbank.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 6 of 29
Commercial securities only
account for minor share
At the end of the second quarter, the volume of mortgage Pfandbriefe at
Commerzbank amounted to EUR 12,506m, which represents a reduction of
EUR 1,308m on the combined data for Commerzbank and Hypfra at the end
of the first quarter (Commerzbank: EUR 4,150m + Hypfra: EUR 9,665m). At
the same time, the cover pool decreased by EUR 4,705m from a previous
combined figure of EUR 22,116m (Commerzbank: EUR 10,004m + Hypfra:
EUR 12,112m). An analysis of the maturity structure at the end of the first
quarter of 2016 reveals that Hypfra had a residual term to maturity of less
than six months for (i) a Pfandbriefe volume of EUR 2,109m and (ii) a cover
pool worth EUR 2,760m. We therefore deduce that a significant portion of the
change is attributable to this factor, at least for outstanding Pfandbriefe. With
regard to size categories in the mortgage-backed cover pool, securities with
a volume of less than EUR 300,000 accounted for a share of 83% at Com-
merzbank in the first quarter, while the corresponding figure at Hypfra was
53%. Despite the merger, this percentage increased to 84% in the second
quarter. Distinguishing between the mortgage-backed cover assets by type
of use provides an indication of the change in the cover pool. While residen-
tial made up a share of 63.1% in Hypfra’s pool at the end of the first quarter,
the corresponding value for Commerzbank as at 31 March was 99.9%. Even
with the merger, at 98.1% this figure is virtually unchanged as at 30 June.
Several shifts occurred within the segment of commercial properties used for
residential purposes. The share of condominiums declined from 24.2% to
23.1%, while that of single and multi-family houses has also fallen slightly to
61.8% (previously 64.2%). By contrast, multi-family houses have gained
against the first quarter, with the share rising from 11.6% to 13.1%. Com-
mercial collateral accounts for 1.94% of the pool at present. This is above all
attributable to retail properties, which now constitute 1.4% of mortgage-
backed securities. In the first quarter, receivables from German debtors
formed 100% of Commerzbank’s pool and made up 83.8% of Hypfra’s cover
assets. In the combined pool, receivables from German debtors also domi-
nate and constitute 100% of the original cover pool.
Higher volume of public sec-
tor Pfandbriefe
The transfer of Hypfra's outstanding public sector Pfandbriefe to Com-
merzbank has significantly increased the outstanding volume. While public
sector Pfandbriefe in the amount of EUR 1,872m were outstanding in the first
quarter, the volume had risen to EUR 13,770m as at the end of June, which
represents a further increase of EUR 375m resulting from an absolute
change in the combined values of EUR 13,396m as at 31 March (Com-
merzbank: EUR 1,872m + Hypfra: EUR 11,524m).
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 7 of 29
Overview of public sector Pfandbrief pool – Commerzbank Group
Breakdown by size categories – public sector Pfandbriefe
0
5,000
10,000
15,000
20,000
Öffentlichen Pfandbriefe Cover Pool Overcollateralization
EU
Rm
Coba_Q2 Coba_Q1 Delta Hypfra_Q1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Coba_Q2 Coba_Q1 Delta Hypfra_Q1
more than 100 mn. Euros more than 10 mn. Euros up to 100 mn. Euros up to 10 mn. Euros
Source: Issuers, NORD/LB Fixed Income Research Source: Issuers, NORD/LB Fixed Income Research
Cover pool also recorded
growth
At the same time, the cover pool of public sector Pfandbriefe increased dis-
proportionately: while the combined volume of Commerzbank and Hypfra
amounted to EUR 14,498m in the first quarter (Commerzbank: EUR 2,222m
+ Hypfra: EUR 12,276m), the combined volume of Commerzbank was EUR
15,938m, which is an increase of EUR 1,440m against the pro forma com-
parison with the first quarter. In terms of size categories, it becomes appar-
ent that receivables with a volume in excess of EUR 100m dominate the
combined pool more strongly than had been the case at Commerzbank
(74%) and Hypfra (81%) at the end of the first quarter, accounting for 84% at
the half-year mark. This development is attributable to cover assets in this
size category rising by a further EUR 1,886m in the second quarter in addi-
tion to the aggregate values of EUR 11,324m from Commerzbank and Hyp-
fra from the first quarter (Commerzbank: EUR 1,642m + Hypfra: EUR
9,683m). The consolidation of the cover pools and additional availability of
cover assets also led to a change in the debtor structure. In the first quarter,
receivables to regional authorities still accounted for a share of 47.5% in
Commerzbank’s pool and 48.5% in that of Hypfra, but this ratio has now
decreased to 42% for the combined cover pool. The second-largest asset
category with a share of 30% as at 30 June is receivables from other debt-
ors, which had been less prominent in the first quarter at both Commerzbank
(4.5%) and Hypfra (10.8%). The combined pool also has a different geo-
graphic distribution. While in the first quarter, receivables against German
debtors made up a share of 51.6% in the cover pool of Hypfra and 80.1% in
that of Commerzbank, the combined figure now is 56.8%, with Austria com-
prising 9.4% and Italy 8.6%.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 8 of 29
Ratings In response to the pool merger in May, Moody’s had placed all public sector
Pfandbriefe that were issued by Commerzbank before the merger on its
watch list for downgrade, but the ratings have now been confirmed as Aaa in
view of the adequate overcollateralisation. In addition, the assessment of
public sector Pfandbriefe issued by Hypfra was upgraded from Aaa to Aa1.
The mortgage Pfandbriefe of both Commerzbank and Hypfra have been
rated as Aaa by Moody’s, as a result of which there is no change after the
consolidation of the two pools.
Conclusion The transfer of Hypfra’s Pfandbriefe to Commerzbank and the merger of the
cover pools has, in our view, not had a negative impact on the creditor posi-
tion for mortgage Pfandbriefe. Commerzbank has successfully maintained
the pool quality of the existing cover assets and kept the share of residential
practically constant. With regard to public sector Pfandbriefe, the quality also
does not appear to have suffered. Although the previous Commerzbank pool
was significantly smaller than it is now after the merger and the share at-
tributable to Germany has declined substantially, Moody’s assigns a collat-
eral score of 5.1% to the combined pool. This value is therefore slightly lower
than that of Commerzbank’s pool as at 31 March, which had been set at
5.4%. Conversely, Moody’s ascertained a collateral score of 4.7% for Hyp-
fra’s cover pool (public sector) as at 31 December 2015, which is slightly
lower than the current level.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 9 of 29
Covered bonds Savings bank Pfandbriefe in the second quarter of 2016
Analyst:
Kai Ebeling, CIIA
Data are based on section 28
reports
All Pfandbrief banks are subject to the transparency provisions of section 28
of the German Pfandbrief Act (Pfand-BG) and publish details of their out-
standing Pfandbriefe and the associated cover assets on their websites eve-
ry quarter. The data on the second quarter of 2016 was combined to give an
overview of the Pfandbrief savings banks in the article. No new Pfandbrief
issuer emerged in the last quarter, so there has been no change in the num-
ber of savings banks examined in comparison with the previous quarter.
Chronological comparison of volume and overcollateralisation
Share of total market circulation
0%
20%
40%
60%
80%
100%
120%
140%
0
5
10
15
20
25
Q2/13Q3/13Q4/13Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15Q1/16Q2/16
Vo
lum
en
in E
UR
bn
mortgage Pfandbriefe public sector Pfandbriefe
OC mortgage (rhs) OC public sector (rhs)
204
172
377
202
23
9,9%
1,4%
6,0%
0%
2%
4%
6%
8%
10%
12%
0
50
100
150
200
250
300
350
400
Öpfe Hypfe Gesamt
Pfa
nd
bri
ef
volu
me
in
EU
Rb
n
market volume saving banks market share sving banks Pfandbrief
Source: Issuers, NORD/LB Fixed Income Research Source: Issuers, NORD/LB Fixed Income Research
Volume of outstanding mort-
gage Pfandbriefe increases
once more
Up to the end of June 2016, a total of EUR 22.651bn of savings bank Pfand-
briefe were in circulation. Of this figure, EUR 20.181bn (89.12%) were at-
tributable to mortgage Pfandbriefe and EUR 2.470bn (10.9%) to public sec-
tor Pfandbriefe. The total amount in circulation has therefore risen sharply,
by 14.7%, compared with the previous year’s figure
(Q2 2015: EUR 19.755bn), although minimal growth of only 0.1% was
achieved compared with the previous quarter (Q1 2016: EUR 22.623bn).
While the volume of mortgage Pfandbriefe increased slightly compared with
the previous quarter, at EUR 54m (+0.3%), the volume of public sector
Pfandbriefe in circulation recorded a slight fall of EUR 15m (-0.1%). The
decrease amounted to 2.4% compared with the previous year’s figure. The
cover pool increased by EUR 3.501bn compared with the previous year’s
figure (+10.5% yoy) to EUR 36.710bn in total, which results in an overcollat-
eralisation ratio of 62.1%. Sub-divided into the respective asset classes, the
aggregate cover pool volume of mortgage-backed programmes increased by
12.5% yoy to EUR 32.617bn, while the public sector cover pool has fallen by
3.1% yoy to EUR 4.093bn. This results in a current overcollateralisation ratio
of 61.6% for outstanding mortgage Pfandbriefe and 65.7% for public sector
Pfandbriefe.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 10 of 29
Share of total volume in-
creasing slightly
However, at EUR 22.65bn, the share of Pfandbrief savings banks must still
be classified as low despite the increase in the volume of outstanding
Pfandbriefe and the slight fall in total market circulation, which stood at EUR
376.8bn in May 2016, compared with Q2 2015 (EUR 19.8bn Pfandbrief sav-
ings banks and EUR 391.3bn total market circulation). Only 1.4% (Q2 2015:
1.3%) of the public sector Pfandbriefe in circulation is attributable to savings
banks as issuers. In the case of mortgage Pfandbriefe (the Bundesbank data
on total circulation also include ship and aircraft Pfandbriefe), the savings
banks at least achieve a share of 9.9% (Q2 2015: 8.7%), which represents
an increase of 1.2 percentage points on last year’s examination of the data.
If the total volume of all types of Pfandbrief is considered, the Pfandbrief
savings banks only account for 6.0% of total market circulation of EUR
376.8bn (in May) with their outstanding volume of EUR 22.65bn and an in-
crease of 1.0 percentage points in the total volume of all savings banks
compared with total market circulation is apparent compared with Q2 2015.
Top 10 – Mortgage Pfandbriefe Top 10 – Public sector Pfandbriefe
24,1%
16,4%
14,5%3,4%
3,4%
3,1%
3,1%
2,2%
2,1%
2,1%
25,2%
Hamburger Sparkasse
Sparkasse KölnBonn
Kreissparkasse Köln
Sparkasse Essen
Sparkasse Pforzheim Calw
Sparkasse MünsterlandOst
Stadtsparkasse Düsseldorf
Taunus Sparkasse
Nassauische Sparkasse
Förde Sparkasse
Others
33,8%
18,1%10,4%
9,4%
8,5%
4,7%
4,5%
3,0%2,1%
1,6%3,9% Sparkasse Hannover
Kreissparkasse Köln
Sparkasse Hanau
Sparkasse Aachen
Stadtsparkasse Düsseldorf
StadtsparkasseMönchengladbach
Sparkasse Holstein
Nassauische Sparkasse
Sparkasse KölnBonn
Kreissparkasse Göppingen
Others
Source: Issuers, NORD/LB Fixed Income Research Source: Issuers, NORD/LB Fixed Income Research
41 savings banks used
Pfandbriefe for funding in
March
At the end of Q2 2016, a total of 41 savings banks funded their operations by
issuing Pfandbriefe. The majority of the banks, namely 38 banks, used mort-
gage Pfandbriefe, while only 14 savings banks had public sector Pfandbriefe
outstanding. Eleven banks currently even make use of both asset classes. In
total some 10% of German savings therefore have the option of funding their
operations via Pfandbriefe. There is consequently a marked gap between
mortgage Pfandbriefe and public sector Pfandbriefe not just in terms of out-
standing volume but also in the number of issuers. With both types of Pfand-
brief, the top 3 issuers in each case account for more than 50% of market
share. Hamburger Sparkasse (24.1%), Sparkasse KölnBonn (16.4%) and
Kreissparkasse Köln (14.5%) together have a 55.0% share of total mortgage
Pfandbriefe in circulation while the three largest Pfandbrief savings banks for
public sector Pfandbriefe are Sparkasse Hannover (33.8%), Kreissparkasse
Köln (18.1%) and Sparkasse Hanau (10.4%), which together account for a
market share of 62.3%. This shows that the option of using Pfandbriefe for
funding purposes plays a significant role for some savings banks.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 11 of 29
Breakdown of mortgage Pfandbriefe collateral – savings banks
Breakdown of mortgage Pfandbriefe collateral – vdp banks
50,1%
18,7%13,7%
5,6%
4,2%
3,2%
2,9%
1.6%0,1%0,0%
11,9%
Single-family houses Multi-family housesApartments Other buildingsSubstitution assets Industrial buildingsOffice buildings Retail buildingsUnfinished buildings commercial Plots commercialUnfinished buildings residential Plots residentialDerivatives
24,4%21,9%
20,0%
14,0%
8,8%
8,1%
1,5%
0,7%
2,8%
Single-family houses Multi-family housesOffice buildings Retail buildingsApartments Other buildingsIndustrial buildings Unfinished buildings commercialUnfertige Neubauten privat Plots commercialUnfinished buildings residential
Source: Issuers, NORD/LB Fixed Income Research Source: Issuers, NORD/LB Fixed Income Research
Savings banks concentrate
on local authorities
Mortgage Pfandbriefe represent a key funding instrument for savings banks,
while public sector Pfandbriefe play a subordinate role. However, the focus
of business for savings banks is clear from the composition of the cover
pools for public sector Pfandbriefe. The largest share is accounted for by
local authorities, at 54.0%. Regional authorities hold 25.0% of cover pools,
followed by other debtors, at 18.6%. The high proportion of local authorities
can be explained from the business model of savings banks, which provide
financing for local municipalities in various cases. By contrast, for vdp banks,
regional authorities (34.6%) are the most important type of collateral ahead
of local authorities (33.9%) and other debtors, at 18.2%.
Breakdown of collateral (public sector Pfandbriefe) – savings banks
Breakdown of collateral (public sector Pfandbriefe) – vdp banks
54,0%
25,0%
18,6%
2,3%
Local authorities Regional authoritiesOther public debtors Central government
34,6%
33,9%
18,2%
13,3%
Regional authority Local authorityOther public debtors Central governement
Source: Issuers, NORD/LB Fixed Income Research Source: Issuers, NORD/LB Fixed Income Research
Conclusion Despite another increase in outstanding volumes, savings bank Pfandbriefe
are still a niche product compared with the total German Pfandbriefe in circu-
lation. Nevertheless, the Pfandbrief constitutes a key funding instrument for
some issuers which can help, in particular, to guarantee long-term funding.
Savings bank Pfandbriefe may also be attractive to investors because of
their granularity and the high residential percentage.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 12 of 29
SSAs Debt brake? – no problem; budget surplus in the first half
Analyst:
Mario Gruppe, CIIA
Financing surplus
at all levels of government
Sustained sound macroeconomic growth in Germany has had a positive im-
pact on public sector budgets in the first half of 2016. As the Federal Statisti-
cal Office has announced, the financing surplus was EUR 18.5bn in the first
half. This equates to 1.2% of nominal GDP. All levels of government have
received more than they have spent in the period under consideration. Ap-
proximately half of the surpluses were attributable to the federal government
(EUR 9.7bn). However, the Länder (EUR 0.4bn) and municipalities (EUR
2.5bn) also achieved a budget surplus. The positive picture is completed by
the social insurance entities, which also reported a budget surplus of EUR
5.9bn.
Conclusions as to the year
as a whole are only
possible to a limited extent
The chances that the German government will also report a positive budget
for 2016 as a whole are therefore increasing. However, the half year figures
can only be extrapolated to a limited extent, especially as the fiscal balance
is regularly lower in the second half than at the beginning of the year for
structural reasons. The Bundesbank profit is posted in the first half, for in-
stance, which benefits the income side in the first few months of the year. On
the other hand, the expenses side is more stressed from 01 July when the
increase in pensions comes into effect. Some special effects are also likely
to have an adverse impact on budget development in the second half. For
instance, the EU has called for comparatively little capital in the first half,
which is likely to change again over the rest of the year.
German government
benefiting from
low funding costs
Sustained low interest rates continue to have a positive impact. It is therefore
not surprising that interest expenses fell sharply again in the months from
January to June (-13.8%). However, irrespective of this, expenses in total
rose sharply (+3.6%). Perceptibly more was spent on advance payments
(+9.2%), in particular, and social assistance benefits in kind (+6.7%) than
recently. In the case of advance payments, the increase in expenditure for
people seeking protection became apparent primarily. The increase in social
assistance benefits in kind is largely attributable to expenses for social wel-
fare/youth welfare as well as benefits for asylum seekers. However, growth
in expenses was more than offset by the rise in income. At this point, we
should highlight the increase in tax receipts, whereby the increase in proper-
ty and income taxes (+6.1%) was far more marked than was the case for
production and import levies (+3.3%), where value added tax is the most
important item.
Conclusion Sound economic growth and the extremely positive situation on the German
employment market are benefiting public sector budgets. Accordingly, this
led to a budget surplus at all levels of government in the first half of the year.
Germany is therefore succeeding in offsetting the increase in expenses
caused by the influx of refugees with an increase in income. It is therefore
not surprising that the federal government, for instance, is likely to be far less
present in the primary market over the coming year. However, if this trend
persists, the refinancing requirement of the Länder and municipalities is also
likely to shrink.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 13 of 29
Covered Bonds/SSA ECB tracker
Analysts:
Matthias Melms, CIIA, CCrA
Mario Gruppe, CIIA
In this section, we publish weekly updates on the covered bonds, ABS, spe-
cific agencies, supranationals and sovereign bonds which the European
Central Bank (ECB) is purchasing. We provide an overview of the develop-
ment of purchases.
Increase to net inflows once
again as the summer break
comes to an end
As at the reference date of 26 August, the ECB reported a portfolio volume
totalling EUR 189.209bn purchased so far as part of the CBPP3. This repre-
sents an increase of EUR 849m on the previous week’s value, with no ma-
turities falling due in the previous reporting period. Overall, net inflows in the
past four weeks rose slightly to EUR 2.575bn (previously:
EUR 2.319bn). On account of the increased primary market activity, we
expect that the weekly purchase volume will rise significantly in the coming
weeks, although the original target volume of EUR 10.0bn (including pur-
chases made under the ABSPP) still does not appear to be attainable, in our
view. In terms of the ABSPP, there were maturities amounting to EUR 200m
in the previous reporting week against purchases of EUR 100m. Overall, the
portfolio declined by EUR 99m to a total of EUR 20.216bn. Net inflows fell
significantly in the past four weeks on account of basis effects to EUR -
223m (previously EUR 25m). Within the framework of the CSPP, the ECB
bought EUR 1,504m last week, bringing the overall volume to a total of EUR
19,333m.
Weekly PSPP purchases fall
significantly again
The trend towards falling PSPP purchase volumes, which has been evident
for a number of weeks now, continued once more in the past trading week.
As at the reference date of 26 August, the Eurosystem had only acquired
new bonds worth a total of EUR 10.3bn. This not only represents one of the
lowest amounts since the overall monthly purchase volume was raised to
EUR 80bn in April, but also one of the lowest since the programme was
launched in spring 2015. While previously we have certainly witnessed the
odd week in which the purchase volumes have deviated noticeably from the
average, the recent trend is striking and can be seen as a distinct tightening
of the market material eligible for purchase. We are of the view that this
assessment of the market situation is supported by the fact that new Bun-
desländer bonds have once again been purchased by the Eurosystem. In
this context, a first Brandenburg bond found its way into the Eurosystem’s
books, among others. Accordingly, we believe that this only increases the
probability that the ECB will not be able to avoid making adjustments to the
terms of purchase at its meeting next week.
Upcoming reverse auctions (Banque de France – BDF)
ISIN Bond Central bank & date
EU000A1G0BC0 EFSF 1 7/8 05/23/23 Banque de France (02.09.)
EU000A1G0BQ0 EFSF 1 3/4 06/27/24 Banque de France (02.09.)
EU000A1U9944 ESM 0 1/2 03/02/26 Banque de France (02.09.)
EU000A1U9977 ESM 0 7/8 07/18/42 Banque de France (02.09.)
Total targeted size: EUR 150-250m Source: BDF, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 14 of 29
Completed reverse auctions (DeNederlandscheBank – DNB)
ISIN Bond Min. Mean Max Date
XS0695263730 BNG 3 10/25/21 116.880. 116.880 116.880 29.08.
XS1280394229 BNG 0 ½ 08/26/22 N/A N/A N/A 29.08.
XS0951381523 NEDWBK 1 3/4 07/09/20 N/A N/A N/A 29.08.
XS0463097237 NEDWBK 0 ½ 10/27/22 104.080 104.080 104.080 29.08.
XS1346315382 NEDWBK 0 ½ 01/19/23 N/A N/A N/A 29.08.
XS0873878283 BNG 1 ½ 04/15/20 N/A N/A N/A 29.08.
XS0537711144 BNG 2 ⅝ 09/01/20 111.900 111.905 111.910 29.08.
XS0706261368 NEDWBK 3 11/16/23 N/A N/A N/A 29.08.
XS1361603209 NEDWBK 0.05 02/10/21 N/A N/A N/A 29.08.
XS1166023777 BNG 0 ⅜ 01/14/22 103.270 103.270 103.270 29.08.
Total Amount Offered EUR 130m
Total Amount Allocated EUR 50m
Source: DNB, NORD/LB Fixed Income Research
ECB purchase list for PSPP – regional issuers
Issuer Jurisdiction ISINs already purchased
BADWUR GE 2
BAYERN GE -
BERGER GE 9
BREMEN GE 3
BRABUR GE 1
HESSEN GE 7
HAMBRG GE 1
NIESA GE 3
MECVOR GE -
NRW GE 15
RHIPAL GE 4
SAARLD GE -
SCHHOL GE -
SAXONY GE -
SACHAN GE -
THRGN GE -
LAENDER GE -
IDF FR 2
VDP FR 1
MADRID ES 6
CASTIL ES 1
BASQUE ES 1
ARAGON ES 1
WALLOO BE 1
Source: ECB, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 15 of 29
ECB purchase list for PSPP
Issuer Jurisdiction ISINs already purchased
EIB SNAT 49
EFSF SNAT 32
ESM SNAT 14
EU SNAT 20
COE SNAT 7
NIB SNAT 1
EURAT SNAT -
KFW DE 39
RENTEN DE 16
NRWBK DE 23
LBANK DE 6
CADES FR 18
RESFER FR 13
UNEDIC FR 16
AGFRNC FR 14
OSEOFI FR 11
CDCEPS FR 3
CNA FR 2
ACOSS FR -
BNG NL 22
NEDWBK NL 17
NEDFIN NL 2
OBND AT 8
ASFING AT 8
FINNVE FI 4
TVRFIN FI 2
ICO ES 9
ADIFAL ES 3
CDEP IT 3
IP (REFER / ESTPOR) PT -
SEDABI SI 1
DARSDD SI -
FADE ES 4
KUNTA FI 1
PARPUB PT 1
CASDEL IT -
AFLBNK FR 2
APHP FR -
GDCHU FR -
SPABSS FR -
HSGFIN IE -
FRBRTC BE -
SOCWAL BE -
FONWAL BE -
SWLBEL BE -
Source: ECB, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 16 of 29
CBPP3 Overview
Weekly purchase volume [EURbn] Primary and secondary market share [EURbn]
176
178
180
182
184
186
188
190
0.0
0.5
1.0
1.5
2.0
2.5
17/0
6/1
6
24/0
6/1
6
01/0
7/1
6
08/0
7/1
6
15/0
7/1
6
22/0
7/1
6
29/0
7/1
6
05/0
8/1
6
12/0
8/1
6
19/0
8/1
6
26/0
8/1
6
EU
Rb
n
EU
Rb
n
Weekly purchases Total volume (rhs)
0
20
40
60
80
100
120
140
160
180
200
0
2
4
6
8
10
12
14
Oct-14
Nov-
14D
ec-
14Ja
n-1
5F
eb-1
5M
ar-
15
Apr-
15
May-
15
Jun-1
5Ju
l-15
Aug-1
5S
ep-1
5O
ct-15
Nov-
15D
ec-
15Ja
n-1
6F
eb-1
6M
ar-
16
Apr-
16
May-
16
Jun-1
6Ju
l-16
EU
Rb
n
EU
Rb
nPrimary market Secondary market Total volume (rhs)
Source: Bloomberg, NORD/LB Fixed Income Research Source: ECB, NORD/LB Fixed Income Research
Total volume of covered bond purchase programmes [EURbn]
0
50
100
150
200
250
Jul-0
9
Nov
-09
Ma
r-10
Jul-1
0
Nov
-10
Ma
r-11
Jul-1
1
Nov
-11
Ma
r-12
Jul-1
2
Nov
-12
Ma
r-13
Jul-1
3
Nov
-13
Ma
r-14
Jul-1
4
Nov
-14
Ma
r-15
Jul-1
5
Nov
-15
Ma
r-16
Jul-1
6
CBPP1 [EUR 16,4bn] CBPP2 [EUR 7,4bn] CBPP3 [EUR 189,2bn]
Source: Bloomberg, NORD/LB Fixed Income Research current volume in [ ]
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 17 of 29
PSPP overview
Weekly purchase volume [EUR bn] Distribution by country at month-end [EUR bn]
650
700
750
800
850
900
950
1000
1050
5
7
9
11
13
15
17
19
17.0
6.1
6
24.0
6.1
6
01.0
7.1
6
08.0
7.1
6
15.0
7.1
6
22.0
7.1
6
29.0
7.1
6
05.0
8.1
6
12.0
8.1
6
19.0
8.1
6
26.0
8.1
6
Weekly purchases Total volume (rhs)
0
20
40
60
80
100
120
140
160
180
200
EU
Rb
n
Source: Bloomberg, NORD/LB Fixed Income Research Source: ECB, NORD/LB Fixed Income Research
Overall distribution of PSPP buying at month-end (EURbn)
Country Adjusted
distribution key1
Purchases (EUR m)
Expected purchases (EUR m)
2
Difference (EUR m)
Average time to maturity in
years
Market average in years
3
Difference in years
DE 26.3% 225,516 224,963 553 7.60 13.90 -6.3
FR 20.7% 179,160 178,366 794 7.71 11.27 -3.6
IT 18.0% 155,876 154,209 1,667 9.24 7.27 2.0
SNAT 0.0% 109,158 109,571 -413 7.05 11.23 -4.2
ES 12.9% 111,788 110,594 1,194 9.71 7.34 2.4
NE 5.9% 50,199 50,054 145 7.71 12.40 -4.7
BE 3.6% 31,038 30,952 86 9.79 14.52 -4.7
AT 2.9% 24,628 24,564 64 9.11 12.53 -3.4
PT 2.6% 20,096 20,953 -857 10.07 7.33 2.7
FI 1.8% 15,819 15,735 84 7.55 10.52 -3.0
IE 1.7% 14,237 14,332 -95 9.31 11.35 -2.0
SK 1.1% 7,290 8,277 -987 7.92 9.35 -1.4
SI 0.5% 3,952 4,120 -168 8.23 8.40 -0.2
LU 0.3% 1,621 1,968 -347 6.65 13.98 -7.3
LV 0.4% 1,050 1,459 -409 6.56 7.02 -0.5
LT 0.6% 1,844 2,438 -594 6.50 6.63 -0.1
MT 0.1% 598 670 -72 10.89 9.79 1.1
CY 0.2% 269 1,506 -1,237 5.19 6.09 -0.9
EE 0.3% 66 426 -360 1.96 0.00 2.0
GR 0.0% 0 0
0.00 13.2 -
Total / average
100.0% 954,205 - - 8.26 9.44 -1.2
1 Based on the ECB capital key, adjusted to include supras and the disqualification of Greece
.
2 Based on the adjusted distribution key.
3 Weighted average time to maturity of the bonds eligible for purchasing under the PSPP.
Source: ECB, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 18 of 29
Covered Bonds Charts & Graphs
Outstanding volume (Bmk.) Top 10 countries (Bmk.)
20.6%
19.8%
11.4%8.1%
5.3%
4.7%
4.5%
4.1%
3.1%
2.8%
15.4%
EUR 1077.8bn
FR
ES
DE
IT
GB
NL
NO
CA
SE
AT
Others
Country Vol. (€bn) No. of CBs ØVol. (€bn) Vol. weight.
ØMod. Duration
FR 222.1 168 1.3 4.2
ES 213.2 163 1.3 3.1
DE 123.3 186 0.7 3.9
IT 87.7 90 1.0 3.2
GB 57.3 47 1.2 3.5
NL 51.2 40 1.3 4.6
NO 48.2 46 1.0 3.3
CA 44.6 36 1.2 3.6
SE 33.9 33 1.0 3.7
AT 30.5 47 0.6 3.1
Issue volume by year (Bmk.) Maturities next 12 months (Bmk.)
0
50
100
150
200
250
300
350
2011 2012 2013 2014 2015 2016
EU
Rb
n
ATAUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPTSESGTR
0
5
10
15
20
25
30
35
40
08/1
6
09/1
6
10/1
6
11/1
6
12/1
6
01/1
7
02/1
7
03/1
7
04/1
7
05/1
7
06/1
7
07/1
7
EU
Rb
n
AUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPTSESGTR
Avg. mod. duration by country (vol. weighted) Rating distribution (vol. weighted)
0
1
2
3
4
5
6
AT
AU
BE
CA
CH
CZ
DE
DK
ES FI
FR
GB IE IT LU
NL
NO
NZ
PT
SE
SG
TR
63.0%
4.2%16.1%
0.9%
5.2%
4.1%0.4% 3.3%
2.2%
0.6%0.0%
6.1%
AAA/Aaa
AA+/Aa1
AA/Aa2
AA-/Aa3
A+/A1
A/A2
A-/A3
BBB+/Baa1
BBB/Baa2
BBB-/Baa3
BB+/Ba1
BB/Ba2
BB-/Ba3
Source: Bloomberg, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 19 of 29
Covered Bonds Charts & Graphs
Spread development (last 15 issues)
DN
BN
O 0 1
/4 0
9/0
7/2
6
DB
0 1
/4 0
8/3
1/2
8
UC
GIM
0 3
/8 1
0/3
1/2
6
SPA
BO
L 0
1/4
08/3
0/2
6
CM
ZB
0 1
/8 1
2/1
5/2
6
WLB
AN
K 0
.1 0
8/3
1/2
6
CB
AA
U 0
1/2
07/2
7/2
6
CM
0 0
7/2
5/2
2
CM
ZB
0.0
5 0
7/1
1/2
4
BR
F 0
1/4
07/0
1/2
3
CA
FFIL
0 3
/8 0
6/2
3/2
5
SH
BA
SS
0.0
5 0
6/2
0/2
2
BZ
LN
Z 0
1/8
06/1
7/2
1
WS
TP 0 1
/8 0
6/1
6/2
1
ND
B 0
3/8
06/1
5/2
3
-20
-15
-10
-5
0
5
10
15
20
25
bp
Reoffer Spread Current ASW
Bid-to-Cover (last 15 issues)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
DN
BN
O 0
1/4
09/0
7/2
6
DB
0 1
/4 0
8/3
1/2
8
UC
GIM
0 3
/8 1
0/3
1/2
6
SP
AB
OL 0
1/4
08/3
0/2
6
CM
ZB
0 1
/8 1
2/1
5/2
6
WLB
AN
K 0
.1 0
8/3
1/2
6
CB
AA
U 0
1/2
07/2
7/2
6
CM
0 0
7/2
5/2
2
CM
ZB
0.0
5 0
7/1
1/2
4
BR
F 0
1/4
07/0
1/2
3
CA
FF
IL 0
3/8
06/2
3/2
5
SH
BA
SS
0.0
5 0
6/2
0/2
2
BZ
LN
Z 0
1/8
06/1
7/2
1
WS
TP
0 1
/8 0
6/1
6/2
1
ND
B 0
3/8
06/1
5/2
3
EU
Rb
n
Amt. Issued Order Book Bid-to-Cover (rhs)
Spread development by country Performance (total return)
-50 -40 -30 -20 -10 0 10
TRSGSEPTNZNONLITIE
GBFRFI
ES - SingleES - Multi
DKDECHCABEAU
bpΔ 3 Months Δ Week Δ Month
0% 5% 10% 15% 20%
Overall
1-3Y
3-5Y
5-7Y
7-10Y
2016 ytd
2015
2014
2013
2012
2011
Source: Bloomberg, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 20 of 29
Covered Bonds Charts & Graphs
Germany & Austria France
-30
-20
-10
0
10
20
30
40
50
0 1 2 3 4 5 6 7 8 9 10
AS
W in b
p
years to maturity
AT DE - Öpfe DE - Hypfe DE - Others
-30
-25
-20
-15
-10
-5
0
0 1 2 3 4 5 6 7 8 9 10
AS
W in b
p
years to maturityOF OH Structured
Nordics Other Core
-15
-10
-5
0
5
10
0 1 2 3 4 5 6 7 8 9 10
AS
W in b
p
years to maturityDK FI NO SE
-20
-15
-10
-5
0
5
10
15
20
0 1 2 3 4 5 6 7 8 9 10
AS
W in b
p
years to maturityBE CH GB LU NL
Overseas & Others Periphery
0
50
100
150
200
250
300
-15
-10
-5
0
5
10
15
20
25
0 1 2 3 4 5 6 7 8 9 10
AS
W in p
b
AS
W in b
p
years to maturityAU CA NZ SG TR (rhs.)
-30
-10
10
30
50
70
90
110
0 1 2 3 4 5 6 7 8 9 10
AS
W in b
p
years to maturity
ES - Single ES - Multi IE IT PT
Source: Bloomberg, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 21 of 29
SSA Charts & Graphs
Outstanding volume (Bmk.) Top 10 countries (Bmk.)
38,0%
36,9%
10,8%
4,9%
4,2% 1,7%
1,0%
0,9%
0,3%
0,3%
1,0%
5,2%
EUR 1461,8bn GE
SNAT
FR
SP
NE
AS
CA
IT
FI
PO
Others
Country Vol. (€bn) No. of bonds
ØVol. (€bn) Vol. weight.
ØMod. Duration
GE 555,3 476 1,2 4,2
SNAT 539,3 123 4,4 6,7
FR 158,6 97 1,6 5,5
SP 71,6 61 1,2 3,1
NE 61,6 57 1,1 4,5
AS 24,9 24 1,0 6,3
CA 15,1 11 1,4 5,3
IT 12,8 14 0,9 7,3
PO 4,9 6 0,8 5,7
FI 4,0 7 0,6 5,0
Issue volume by year (Bmk.) Maturities next 12 months (Bmk.)
0
50
100
150
200
250
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016e
EU
Rb
n
Other
ES
AT
NL
FR
GE
SNAT
0
5
10
15
20
2508
/16
09
/16
10
/16
11
/16
12
/16
01
/17
02
/17
03
/17
04
/17
05
/17
06
/17
07
/17
EU
Rb
n
Other
ES
AT
NL
FR
GE
SNAT
Avg. mod. duration by country (vol. weighted) Rating distribution (vol. weighted)
0
1
2
3
4
5
6
7
8
GE
SN
AT
FR
SP
NE
AS
CA IT FI
PO
43,8%
12,7%
27,7%
7,9%
0,4%3,5%
1,0%
0,4%0,2%
0,9%
2,8%
AAA/Aaa
AA+/Aa1
AA/Aa2
AA-/Aa3
A+/A1
A/A2
A-/A3
BBB+/Baa1
BBB/Baa2
BBB-/Baa3
BB+/Ba1
BB/Ba2
BB-/Ba3
B+/B1
B/B2
B-/B3
NR
Source: Bloomberg, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 22 of 29
SSA Charts & Graphs
Spread development (last 15 issues) N
RW
0 3
/4 0
8/1
6/4
1
(fix
ed
)
BE
RG
ER
0 5
/8 0
8/2
5/3
6
(fix
ed
)
RH
IPA
L 0
.1 0
8/1
8/2
6
(fix
ed
)
HE
SS
EN
0 3
/4 0
8/0
4/3
6
(fix
ed
)
NIE
SA
0 0
8/0
2/2
4 (
fixed)
AG
FR
NC
0 1
/4 0
7/2
1/2
6
(fix
ed)
ES
M 0
7/8
07/1
8/4
2 (
fixed)
BA
DW
UR
0 0
7/1
9/1
8
(flo
atin
g)
RH
IPA
L 0
07/1
6/1
8 (
fixed)
BN
G 0
.05 0
7/1
3/2
4 (
fixed)
HE
SS
EN
0 3
/8 0
7/0
6/2
6
(fix
ed
)
IDF
0 1
/2 0
6/1
4/2
5 (
fixed)
NIB
0 1
/8 0
6/1
0/2
4 (fi
xed)
CO
E 0
3/8
06/0
8/2
6 (
fixed)
ER
STA
A 0
06/0
7/1
9
(fix
ed
)
-25
-20
-15
-10
-5
0
5
10
15
20
bp
Reoffer Spread / DM Current ASW / DM
Spread development by country Performance (total return)
-25 -20 -15 -10 -5 0 5
GE
SNAT
FR
SP
NE
AS
bp1W 1M 3M
-5% 0% 5% 10% 15% 20% 25% 30%
Overall
1-3
3-5
5-7
7-10
10+
YTD
2015
2014
2013
2012
2011
Performance (total return) – 2015 Performance (total return) – 2015
-1% 0% 1% 2% 3% 4% 5% 6% 7%
Supras
Agencies
Public Banks
Regions
Bundesländer
Periphery
Non-Periphery
1W
1M
3M
6M
12M
YTD
0% 2% 4% 6% 8% 10%
Overall
AAA
AA
A
BBB
1W
1M
3M
6M
12M
YTD
Source: Bloomberg, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 23 of 29
SSA Charts & Graphs
Germany (by segments) France (by risk weight)
-50
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
0 1 2 3 4 5 6 7 8 9 10
AS
W in
bp
years to maturity
National agencies Bundesländer Regional agencies Bunds
-40
-30
-20
-10
0
10
20
30
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
AS
W in
bp
years to maturity
RW: 0% RW: 20% OATs
Netherlands & Austria Supranationals
-50
-40
-30
-20
-10
0
10
20
30
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
AS
W in
bp
years to maturity
Dutch agencies DSLs Austria Austrian agencies
-70
-60
-50
-40
-30
-20
-10
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
AS
W in
bp
years to maturity
Supranationals Supranationals Bunds OATs
Core Periphery
-40
-30
-20
-10
0
10
0 1 2 3 4 5 6 7 8 9 10
AS
W in
bp
years to maturityGerman nat. agencies Bundesländer
German reg. agencies French RW: 0%
French RW: 20% Dutch agencies
Austrian agencies Supras
-50
0
50
100
150
200
250
300
350
400
0 1 2 3 4 5 6 7 8 9 10
AS
W in
bp
years to maturity
Spanish agencies Spanish regions Italian agencies
Portuguese agencies Bonos BTPs
Portugal
Source: Bloomberg, NORD/LB Fixed Income Research
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 24 of 29
Appendix Publication overview
Publication Topics
33/2016 24 August Market overview
Moody’s Quarterly Report Q1/2016
USD funding as an alternative to EUR issues
Planning 2017 – German federal government cuts back primary market
volume
ECB Tracker
32/2016 17 August Market overview
Property prices increase significantly once again
Sale of Propertize B.V.
ECB Tracker
31/2016 10 August Market overview
vdp publishes §28 data for Q2 2016
Movement in the Bund-Länder spread – Lasting trend or temporary
phenomenon?
ECB Tracker
30/2016 03 August Market overview
ECBC publishes covered bond statistics for 2015
Overview of PSPP holdings
ECB Tracker
29/2016 27 July Market overview
Yield levels on the covered bond market
More power to the ESM – what prompted the Bundesbank’s proposal?
ECB Tracker
28/2016 20 July Market overview
Italian risk with covered bondsMoody‘s
Downward trend in yields puts ECB under growing pressure
ECB Tracker
27/2016 13 July Market overview
RLB Oberösterreich assigned Aaa rating by Moody‘s
Overview of PSPP holdings
ECB Tracker
26/2016 6 July Market overview
Fitch plans to change rating methodology
High issuance volume in first six months
Half-year review 2016 for SSAs
ECB Tracker
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 25 of 29
Appendix Contacts
Fixed Income Research
Michael Schulz Head +49 511 361-5309 [email protected]
Kai Niklas Ebeling Covered Bonds +49 511 361-9713 [email protected]
Mario Gruppe Public Issuers +49 511 361-9787 [email protected]
Michaela Hessmert Banks +49 511 361-6915 [email protected]
Christopher Kief Corporates / Retail Products +49 511 361-4710 [email protected]
Melanie Kiene Banks +49 511 361-4108 [email protected]
Jörg Kuypers Corporates / Retail Products +49 511 361-9552 [email protected]
Matthias Melms Covered Bonds +49 511 361-5427 [email protected]
Sascha Remus Corporates / Retail Products +49 511 361-2722 [email protected]
Norman Rudschuck Public Issuers +49 511 361-6627 [email protected]
Martin Strohmeier Corporates / Retail Products +49 511 361-4712 [email protected]
Kai Witt Corporates / Retail Products +49 511 361-4639 [email protected]
Markets Sales
Carsten Demmler Head +49 511 361-5587 [email protected]
Institutional Sales (+49 511 9818-9440)
Daniel Gutschka (Head) [email protected] Gabriele Schneider [email protected]
Thorsten Bock [email protected] Dirk Scholden [email protected]
Uwe Kollster [email protected] Uwe Tacke [email protected]
Daniel Novotny-Farkas [email protected]
Sales Savings Banks / Regional Banks (+49 511 9818-9400)
Christian Schneider (Head) [email protected] Martin Koch [email protected]
Oliver Bickel [email protected] Bernd Lehmann [email protected]
Tobias Bohr [email protected] Jörn Meißner [email protected]
Kai-Ulrich Dörries [email protected] Lutz Schimanski [email protected]
Jan Dröge [email protected] Ralf Schirrling [email protected]
Sascha Goetz [email protected] Brian Zander [email protected]
Stefan Krilcic [email protected]
Sales Asia (+65 64 203136)
Jefferson Ko [email protected] Muhammad Peter Shepherd
Fixed Income / Structured Products Sales Europe (+352 452211-515)
René Rindert (Head) [email protected] Patricia Lamas [email protected]
Morgan Kermel [email protected] Laurence Payet [email protected]
Corporate Sales
Schiffe / Flugzeuge +49 511 9818-8150 Firmenkunden +49 511 9818-4003
Immobilien / Strukturierte Finanzierung
+49 511 9818-8150 FX/MM +49 511 9818-4006
Syndicate / DCM (+49 511 9818-6600)
Thomas Cohrs (Head) [email protected] Wlada Pesotska [email protected]
Axel Hinzmann [email protected] Andreas Raimchen [email protected]
Thomas Höfermann [email protected] Udo A. Schacht [email protected]
Alexander Malitsky [email protected] Marco da Silva [email protected]
Julien Marchand [email protected]
Financial Markets Trading
Corporates +49 511 9818-9690 Collat. Mgmt / Repos +49 511 9818-9200
Covereds / SSAs +49 511 9818-8040 Cust. Exec. & Trading +49 511 9818-9480
Financials +49 511 9818-9490 Frequent Issuers +49 511 9818-9640
Governments +49 511 9818-9660 Structured Products +49 511 9818-9670
Länder & Regionen +49 511 9818-9550
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 26 of 29
Disclaimer
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Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 27 of 29
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2003/6/EC and Directive 2003/125/EC.
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This Investment Recommendation constitutes investment research within the meaning of the definition section of the Cyprus Directive
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Past performance, simulations or forecasts are therefore not a reliable indicator of future results. Mutual funds have no guaranteed
performance and past returns do not guarantee future performance.
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This Investment Recommendation has not been prepared in accordance with Directive 2003/71/EC, as amended, on prospectuses (the
“Prospectus Directive”) or any measures made under the Prospectus Directive or the laws of any Member State or EEA treaty adherent
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Under no circumstances shall this Investment recommendation constitute an offer to sell, or issue or the solicitation of an offer to buy or
subscribe for Products or Services in Luxembourg.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 28 of 29
Additional information for recipients in Netherlands
The value of your investments may fluctuate. Results achieved in the past do not offer any guarantee for the future (De waarde van uw
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This Investment Recommendation is intended only for institutional clients and may not be (i) used by, (ii) copied by any means or (iii)
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No securities commission or similar regulatory authority in Canada has passed on the merits of these securities nor has it reviewed this
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The financial products described in this Investment Recommendation may not be offered or sold, directly or indirectly, to any resident of
the Republic of Finland or in the Republic of Finland, except pursuant to applicable Finnish laws and regulations. Specifically, in the case
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could go up and down
The information contained in this Investment Recommendation is provided on a non-reliance basis and its author does not accept any
responsibility for its content in terms of correctness, accuracy or otherwise.
Covered Bond & SSA View 31 August 2016
NORD/LB Fixed Income Research
Page 29 of 29
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Time of going to press
31 August 2016 09:10h (CET)
Disclosure of NORD/LB’s potential conflicts of interest according to § 34b Abs. 1 WpHG and
Article 5 and 6 according to the Commission Delegated Regulation (EU) 2016/958 of 9 March 2016
None.
Additional disclosures
Sources and price indications
Depending on the issuer, we use information from financial data suppliers, our own estimates, company data and the public media for the
preparation of our Investment Recommendations. Unless otherwise stated in the report, prices indicated relate to the closing price on the
previous day. Fees and commissions apply to securities (buy, sell, hold) and these may reduce the yield on investments.
Analytical methods and updates
In the preparation of Investment Recommendations, we take company-specific methods used for fundamental securities’ analysis and
quantitative/statistical methods, as well as technical analytical methods as the basis for valuations and for the regular updates. All as-
sumptions and analytical derivations related to our recommendation may be extracted from the underlying research analysis. It should be
noted that the results of analyses provide a snapshot overview and that past developments do not constitute a reliable indicator for future
profits. The basis of the valuations is subject to unforeseen change at any time, potentially leading to different conclusions. The present
report is prepared on a weekly basis. Recipients are not automatically entitled to receive report update publications. Detailed information
with respect to our rating methodology is available at the webpage www.nordlb-pib.de/Bewertungsverfahren.
Recommendation system Share of recommendation (12 months)
Positive: Positive expectations for the issuer, a security type or a specif-
ic security of an issuer.
Neutral: Neutral expectations for the issuer, a security type or a specif-
ic security of an issuer.
Negative: Negative expectations for the issuer, a security type or a
specific security of an issuer.
Relative value (RV): Relative value recommendation in comparison to
a market segment, an issuer or a maturity.
Positive: 47%
Neutral: 46%
Negative: 7%
Recommendation history (12 months)
An overview of all our bond recommendations during the last 12 months is available at the webpage www.nordlb-pib.de/empfehlungsuebersicht_renten. Corresponding password: "renten/Liste3".
Issuer / security Date Recommendation Bond type Cause
Distribution: 31.08.2016 15:25