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Please see important disclosure on the last pages.
2
Agenda Page
Market overview 2
Sub-benchmarks on the covered bond market 5
Municipal Schuldscheindarlehen remain on trend 11
ECB tracker 14
Charts & Graphs 20
Publication overview 26
Contacts 27
Find us on Bloomberg: NRDR <GO>
Issue volume – Covereds Issue volume – SSA
0
5
10
15
20
25
30
35
08
/16
09
/16
10
/16
11
/16
12
/16
01
/17
02
/17
03
/17
04
/17
05
/17
06
/17
07
/17
EU
Rbn
AUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPLPTSESGTR
0
5
10
15
20
25
30
35
40
08
/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
Source: Bloomberg, NORD/LB Fixed Income Research Source: Bloomberg, NORD/LB Fixed Income Research
Fixed Income Research
Covered Bond & SSA View 2 August 2017 30/2017
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 2 of 31
Covered Bonds Market overview
Analyst:
Matthias Melms, CIIA, CCrA
A peaceful summer on the
euro primary market
Yet again, there were no EUR-denominated benchmark transactions in the
last five days’ trading, which means that there were still only two new issues in
July from HSH (HSHN 0.1 07/20/20) and Crédit Agricole (ACASCF 0 7/8
08/02/27) of EUR 500m each. ABN also tapped the market for a further
EUR 1.25bn for its outstanding ABNANV 1 3/8 01/12/37, which increased the
outstanding volume to EUR 2.25bn (funged at 21 August). This makes it the
quietest July in the last six years. Last year, EUR 3.3bn was issued after the
Brexit referendum and in 2015, the issuance volume in July amounted to a
very substantial EUR 17.8bn. Overall, at EUR 77bn, issuance volume is down
on the level of the previous year (EUR 94.5bn), but matches the level of 2015
(EUR 77.0bn). Despite the meagre issuance amount, we still view achieve-
ment of our issuance target of EUR 122.0bn as a realistic prospect although
there is currently more downside risk. Outside the euro, Australia’s Westpac
ventured onto the market yesterday with a covered bond worth GBP 500m,
while Canadian issuers were primarily active last month. Accordingly, Cana-
da’s CIBC placed a USD-denominated covered bond worth USD 1.75bn on
the market, having previously issued a covered bond in sterling (GBP 525m).
The Bank of Montreal also issued a sterling floater worth GBP 800m. Conse-
quently, the trend whereby issuers have concentrated more on currencies
outside the euro this year than in previous years also continued in July. We
had already pointed to the fact that for issuers who have the USD as reference
value for their funding, an issue in USD is currently more advantageous than
funding in euros from a maturity of four years because of the trend in the euro-
USD basis swap.
Halkbank announces
covered bond issues
Last month, the state-owned Türkiye Halk Bankasi (Halkbank) announced that
it wanted to issue covered bonds in future. As is clear from a press statement,
the bank plans to issue the equivalent of EUR 1.5bn in total in various curren-
cies, both as fixed coupon bonds and as floaters. Consequently, eight Turkish
banks have issued covered bonds or announced an issue so far. We are ad-
hering to our position adopted in the past, namely that investors should ensure
they are sufficiently compensated for the immense political risks and the in-
creasing doubts about the Turkish legal system before considering invest-
ments. Since we do not consider this to be the case at present levels, we
therefore advise against investments in the country.
Trader’s comment Sales on the secondary market are subdued without any impetus emanating
from the primary market. Although interest among investors is currently sub-
dued, there is a marked preponderance of purchase requests, which can be
explained by the lack of primary supply forcing investors to buy on the sec-
ondary market. Interest is currently concentrated primarily in the maturities
between 5 and 10 years, although secondary purchases have not so far been
reflected in an appreciable spread performance.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 3 of 31
SSA Market overview
Analyst:
Norman Rudschuck, CIIA
Demand for KfW funding
remains strong in Germany
In the first half of 2017, funding provided by the KfW banking group totalled
EUR 36.5bn (+1%). According to the bank, funding provided within Germany
did very well, exceeding the previous year’s figure by almost EUR 1bn (+3%)
with commitments of EUR 27.6bn. Among other things, this was helped by
continuing positive economic expectations among small and medium-sized
enterprises. Considerable interest in promotional loans for residential con-
struction finance among private customers also played a crucial role. The
business volume of KfW’s international financing has decreased to EUR 8.3bn
(-8%). New commitments by KfW Development Bank also fell whereas KfW
IPEX-Bank made a positive contribution, as did DEG. The earnings situation
developed positively with a consolidated profit of EUR 801m in the first half of
2017, profiting, in particular, from an improvement in the valuation result. The
balance sheet total decreased from EUR 507.0bn to EUR 496.7bn.
KfW and its funding
requirement
To fund its promotional business, KfW raised long-term funds equivalent to
EUR 46.9bn on the international capital markets as at 30 June 2017. Approx-
imately 51% of the funds raised were in EUR, while approximately 39% were
in USD. The remaining 10% consisted of six additional foreign currencies. It is
well known that a higher funding requirement was determined in total for 2017
and the figure was increased from the original EUR 75bn or so to EUR 75-
80bn. In the first half of the year, KfW assigned some EUR 2.2bn from its
“Renewable Energies Standard” programme, of which 85% was attributable to
wind energy projects and 12% to solar projects. More than three quarters of
the funds were devoted to projects in Germany and 13% to projects in France.
Here, the funding via an eight-year bond (XS1612940558) at a yield of 0.25%
was especially noteworthy. The volume amounted to EUR 2bn
KfW and L-Bank working
together to fund investment
in digitisation by SMEs
from Baden-Württemberg
KfW banking group and L-Bank, the promotional bank of the State of Ba-
den-Württemberg, have again concluded a global loan agreement based on
KfW’s ERP digitisation and innovation loan in the amount of EUR 200m, as
announced by both banks in a press release. KfW introduced this programme
on 1 July 2017 to support small and medium-sized enterprises with the financ-
ing of a broad range of digitisation and innovation projects. An identical
agreement was concluded on 15 September 2015. L-Bank has expanded and
improved its existing funding for innovation with the new “Innovation Financing
4.0”. It will therefore be the first state promotion institution to use the KfW’s
funding from the ERP digitisation and innovation loan to provide low-interest
loans to SMEs in Baden-Württemberg for digital and innovative investments.
The 4.0 programme can rightly be regarded as an example for linking federal
and state promotional funding. In addition to the cost of funding being reduced
by using funds from the ERP Special Fund, loans are subsidised by the Bun-
desland and L-Bank. Since 1999, more than 30 agreements for a volume of
some EUR 30bn have been concluded between the two banks.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 4 of 31
EIB provides Castile
and León with
EUR 105m for SMEs
The European Investment Bank (EIB) and the Spanish region of Castile and
León (Bloomberg ticker: CASTIL) have signed two new agreements amount-
ing to EUR 105m. The loans will be used to promote growth in the region by
improving transportation and developing the infrastructure for rural tourism.
The EIB has already provided more than EUR 2bn for the region around Val-
ladolid since 1989. A total of EUR 400m is to be mobilised in growth segments
with the aid money, meaning that approximately 8,000 direct jobs can be cre-
ated by 2020. Some 900 jobs are to be created through infrastructure projects
during the construction phase up to 2020 of which some 100 can be viewed
as sustainable.
Moody’s confirms the
EU’s top credit rating
Moody’s (and Fitch) give the EU ratings of AAA and Aaa respectively. Both
rating agencies justify this with the existing political support for the EU from
the 28 member states despite lengthy budget negotiations. They also highlight
contributions to the budget from AAA-rated states as well as the complex pro-
tection mechanisms for investors. Even the upcoming Brexit will be unable to
harm this structure and commitment, whereas the significant credit risk is
viewed as negative. For S&P on the contrary, the protracted budget negotia-
tions indicated weaker political support, which in conjunction with the decline
in the creditworthiness of the 28 EU members resulted in an AA.
Summer slump continues From the end of August, NRW.Bank is planning a European roadshow for a
new green bond. The largest regional promotional bank has already instructed
a consortium for this purpose. At least the State of Lower Saxony has been
tapping the market, although our table must remain empty this week too in the
absence of any new issues. NIESA raised fresh funds of EUR 250m for its
01/2025 bond at ms -20bp. Otherwise, foreign currencies dominate here and
there: accordingly, KFW, NIB or even NWB issued bonds in USD, while KfW
also opted for a tap in AUD. The Canadian province of Alberta also opted for
another foreign currency outside the euro, raising GBP 150m.
Issuer Country Timing ISIN Maturity Volume Spread Rating
- - - - - - - -
Source: Bloomberg, NORD/LB Fixed Income Research (ratings: Fitch, Moody’s and S&P)
Trader’s Comment There was only isolated demand within the context of the purchase pro-
gramme. Demand from the market and from sales was also very manageable.
Yesterday, Niesa 01/25 was increased by EUR 250m at ms -20bp. There was
scarcely any interest in the increase because of the market situation and the
extremely ambitious pricing.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 5 of 31
Covered Bonds Sub-benchmarks on the covered bond market
Analyst:
Kai Ebeling, CIIA
Sub-benchmarks as an
alternative to benchmarks
The issuers we cover mostly have a bond listed on the the iBoxx EUR Covered
Index. To be included on the iBoxx EUR Covered, the following criteria must
be fulfilled. The bond is a covered bond denominated in euro with a minimum
volume of EUR 500m and a residual term of more than one year. In addition,
the issue must be assessed in the investment grade category and at least
three joint leads must have participated in the placement of the bond. If these
criteria are met, a bond can be included in the iBoxx EUR Covered, which as
of July 2017 had an outstanding volume of EUR 782.3bn and a total of 791
individual bonds. However, outside the benchmark volume, in what is known
as the sub-benchmark segment, there are issuers who we believe could offer
an alternative to the traditional benchmark for covered bond investors. For this
reason, we are taking a more detailed look at this segment and presenting
individual issuers or covered bond programmes below.
Definition of the sub-
benchmark segment
As, in contrast to the benchmarks, Markit does not provide a separate index for
the sub-benchmarks, we have transferred some of the criteria of the iBoxx
EUR Covered in order to define a universe for sub-benchmarks. The following
analysis covers EUR-denominated covered bonds with an issuance volume of
at least EUR 250m and a maximum of EUR 499m that have an investment
grade rating. The criteria regarding residual term and joint leads have not been
applied here to define the sub-benchmark segment.
Composition of iBoxx EUR Covered (July 2017) Outstanding sub-benchmark volume
189.8
103.0
75.0
49.4 46.1
45.0
37.7
36.3
33.6
30.8
27.0
26.0
22.1
60.7 FR
DE
ES_Single
IT
CA
GB
NL
NO
ES_Multi
SE
FI
AU
AT
Others
15.2
5.2
1.7
1.5
1.5
1.4
1.1
3.6
DE
FR
AT
ES
CZ
CA
FI
Others
Source: Markit, Bloomberg, NORD/LB Fixed Income Research Source: Bloomberg, NORD/LB Fixed Income Research
Sub-benchmarks as a niche
product
Based on the defined criteria, the sub-benchmark segment has an outstanding
volume of EUR 31.0bn, which is distributed over 110 issues. Therefore, the
volume of the sub-benchmark segment is less than 4% of the euro-
denominated benchmark volume.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 6 of 31
Jurisdictions which
currently do not issue
benchmarks are also
represented in the
sub-benchmark segment
Significant differences are also apparent as regards the distribution of the
outstanding volume by jurisdiction. The issues represented in the iBoxx EUR
Covered originate from a total of 22 different jurisdictions, with French issuers
accounting for the highest volume (EUR 189.8bn), followed by German
Pfandbriefe (EUR 103bn) and Spanish single cédulas (EUR 75bn). In contrast,
German Pfandbriefe dominate the sub-benchmark segment with EUR 15.2bn,
followed by covered bonds from France (EUR 5.2bn) and Austria (EUR 1.7bn).
Aside from these three jurisdictions, 13 other jurisdictions are represented in
the sub-benchmark universe that we are looking at.
Sub-benchmarks – volume (EURbn) Selected issues (August 2016–July 2017; EURbn)
3.0
2.2
2.2
1.7
1.6
1.5
1.4
1.31.21.0
14.0
HESLAN
AXASA
LBBER
BYLAN
CFF
KRSKOE
RY
MUNHYP
RABKAS
WLBANK
Others
0.5
0.5
0.3
0.25
0.25
0.25
KNFP
VUBSK
KA
AABHFH
MOREBO
SUOHYP
Source: Bloomberg, NORD/LB Fixed Income Research Source: Bloomberg, NORD/LB Fixed Income Research
A total of 47 issuers are
represented in the
sub-benchmark segment
Broken down by issuer, the outstanding volume covers a total of 47 different
issuers. The largest issuer in the sub-benchmark segment is Landesbank
Hessen-Thüringen, with a total outstanding volume of EUR 3.0bn, made up of
twelve Pfandbriefe overall, followed by Axa Bank Europe and Landesbank
Berlin, which each have a total of eight issuers with an overall volume of EUR
2.2bn. Bayerische Landesbank accounts for the third-highest volume totalling
EUR 1.7bn (six issues)
Six issuers have refinanced
in the past twelve months
via sub-benchmarks
If we look at i) only the past twelve months and ii) only the issuers who are not
represented with an issue in the iBoxx EUR Covered and iii) illiquid covered
bonds are excluded, only six of the previously examined issuers to have used
sub-benchmarks for refinancing meet the aforementioned criteria. In order to
rule out bonds which were only issued for transactions with the central bank
and those for which no bid or offer prices are currently provided on the market,
we have excluded issues for which no quotes are provided on Bloomberg or
whose liquidity is rated with a BVAL score of less than 5 from the analysis.
The highest volume can be attributed to Natixis Pfandbriefbank and VÚB,
which each issued two issues with a total volume of EUR 0.5bn and have
therefore issued almost 50% of the total volume. The second-highest volume
was issued by Kommunalkredit Austria (EUR 0.3bn), followed by
Ålandsbanken, Mortgage Society of Finland and the Norwegian Møre
Boligkreditt, each with EUR 0.25bn.
Presentation of issuers As the previously mentioned banks are issuers who have only recently issued
their sub-benchmarks, we shall examine them more closely in the following
section.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 7 of 31
Ålandsbanken The Finnish Ålandsbanken was founded in 1919 on the Åland Islands and has
been listed on the NASDAQ OMX Helsinki since 1942. Expansion to the
Finnish mainland followed in 1994, and then to Sweden in 2009. With around
690 employees, the bank serves more than 100,000 customers. Its business
activities are concentrated on wealthy private customers, with the
geographical focus on the three markets of the Åland Islands, Finland and
Sweden. On the Åland Islands the bank is represented with branches and two
representative offices, accounting for a market share of 55-60%. In contrast to
its strategy for the Finnish and Swedish markets, the financial institution on the
Åland Islands offers a full product range and therefore targets all customer
groups. In Sweden and Finland the bank concentrates heavily on wealthy
private individuals and their enterprises. Here too the bank offers a broad
range of financial services, although they are seen more as a complement to
the products in the private banking and premium segment. In Finland
Ålandsbanken is represented with five branches in the affluent regions, in
which it holds a market share of around 1-2%. In Sweden the market share is
less than one percent. The bank is represented there with three offices in
Sweden's largest cities. Ålandsbanken established the covered bond
programme in 2012 to improve the diversification of its funding sources,
setting up one pool for its Finnish assets and one for the Swedish cover
assets. Since then both EUR and SEK-denominated covered bonds have
been issued. The EUR-denominated sub-benchmarks are secured by the
Finnish pool.
Kommunalkredit Austria Kommunalkredit Austria (KA) is a specialist bank focusing on the infrastructure
financing market. It acts as an broker between public (local authorities and
institutions) or private project operators as buyers of the properties and
institutional investors as financiers of these projects. The business model
pursues an “originate to distribute” approach, meaning that the majority of the
acquired volume is intended to be placed with institutional investors.
Geographically the bank’s business activities are concentrated on the Core
Europe segment. The bank focuses on projects in the areas of energy and the
environment, social infrastructure (care homes, healthcare and educational
institutions, administration buildings) and transport (local transport concepts,
road, rail). The owners of KA are Gesona Beteiligungsverwaltung 99.78%, with
the remaining 0.22% held by Österreichische Gemeindebund (Austrian
Association of Municipalities). In 2008 the bank had to be nationalised, which
entailed a number of conditions imposed by the European Commission. In
autumn 2015 Kommunalkredit Austria was successfully reprivatised. To
increase its volume of new business KA opened a new branch in Frankfurt in
January 2017 to ensure that it was also represented on the ground in
Germany.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 8 of 31
Kommunalkredit Austria
uses Social Covered Bond
KA issued a covered bond again in 2017 for the first time since its
restructuring. It was issued as a social covered bond. The funds are therefore
to be used to finance projects in the areas of education (schools, universities,
kindergarten, etc.), health (hospitals, rehab centres, etc.) and social housing.
The projects are selected and the underlying criteria are checked based on
sustainability checklists in the loan application as well as an assessment of the
ecological and social effects. In addition, controversial business segments
(weapons industry, nuclear power, etc.) are excluded. All the proceeds from
the issue are used to refund existing social infrastructure projects at the time
of the issue and for investments in new projects over the term of the bond in
accordance with the selection criteria. In a second opinion on the bank, the
rating agency Sustainalytics has confirmed that the KA Social Covered Bond
Framework is based on the four pillars of the ICMA Green Bond Principles and
the Guidance for Issuers of Social Bonds. Within the scope of reporting annual
information is to be provided on the website, which will chart the development
of the financed portfolio and include descriptions of the positive social effects
of the projects. Moreover, the auditors confirm the allocation of funds.
Mortgage Society of Finland Mortgage Society of Finland was founded in 1860 and is therefore Finland’s
oldest private bank. With its business model the bank focuses on the private
customer business and its expertise lies in mortgage financing. MSF acts as a
mutual society, which is why its customers are simultaneously shareholders in
the bank, although all the income stays in the company to strengthen the
equity base. In January 2016 MSF was awarded a licence by the Finnish
financial supervisory authority to operate the mortgage banking business. MSF
issues covered bonds via its general issuance programme. MSF also uses it to
issue senior unsecured and subordinated bonds in addition to potential
covered bonds. As the business activities of the Mortgage Society of Finland
are concentrated on Finnish growth markets, its cover pool is made up
exclusively of Finnish cover assets. In terms of the type of debtor, they consist
of residential mortgage loans to either private persons or housing
associations.
Møre Boligkreditt Sparbanken Møre was established in 1985 as a result of a merger between
several local savings banks in the Møre og Romsdal region, with the founding
date of the oldest institution stretching back to 1843. In 1989, Sparebanken
Møre was the first savings bank to be listed on the stock exchange in Oslo and
is now the eighth largest bank in Norway. Its business activities are
concentrated on traditional banking services, with the private customer
business accounting for around 70% of the loan portfolio. Møre Boligkreditt
was established in 2008 and acts as a wholly owned subsidiary of
Sparebanken Møre. Møre Boligkreditt safeguards the long-term funding in the
group and refinances loans originated by the parent, which are transferred to
Møre Boligkreditt for long-term refinancing so that they are financed via
covered bonds. Only residential assets originating from Norway are issued to
private individuals and housing cooperatives as loans. To date Møre
Boligkreditt has issued both NOK and SEK and EUR-denominated covered
bonds.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 9 of 31
Natixis Pfandbriefbank NATIXIS Pfandbriefbank (NPB), headquartered in Frankfurt, is a wholly owned
subsidiary of the French bank NATIXIS S.A., in which BPCE, in turn, holds a
majority shareholding of 71% (29% of the shares are in free float). The BPCE
Group is the second-largest banking group in France. NPB has concluded a
control and profit transfer agreement with the parent company NATIXIS S.A,
which in turn provided a restricted letter of comfort to NPB for EUR 2.0bn.
Since August 2012 NPB has had a licence to issue mortgage Pfandbriefe.
Although, in principle, the bank has the business opportunities of a universal
bank, it mainly concludes only transactions in line with the Pfandbrief cover
under the German Pfandbrief Act. The bank is a member of the German
Association of Pfandbrief Banks (vdp) and has been active on the market
since the beginning of 2013. New business is primarily generated in France
and Germany (as at December 2016 58% of the real estate portfolio was in
France and 36% of the assets in Germany). NATIXIS S.A. essentially secures
all NPB property loans by means of a guarantee with matching maturities.
NPB is planning to achieve a new gross business volume of EUR 600m in
2017.
Všeobecná úverová banka VUB has been 95% owned by the Italian banking group Intesa Sanpaolo
(Intesa) since November 2001, although the actual share of Intesa is
approximately 97% (the residual 3% can be attributed to minority
shareholders). As at the end of 2016 the group's total assets amounted to
roughly EUR 14bn, with a total of 4,098 employees servicing over 1.1 million
customers in 226 branches (population of Slovakia: approximately 5.4 million).
The bank's business activities are almost solely focused on Slovakia. VUB
also has a branch in The Czech Republic. As at Q3 2016 VUB was the
second-largest bank in Slovakia, measured by total assets (EUR 13.2bn) and
market share (18.7%), after Slovenská sporiteľňa (Q3 2016: total assets
EUR 14.7bn; market share 20.9%), which is wholly owned by the Austrian
Erste Bank. VÚB finances itself almost exclusively via customer deposits,
although mortgage-backed covered bonds are also used. In Slovakia,
Hypotekárny záložny list (mortgage-backed covered bonds) can only be
issued by banks with a special banking licence; the requirements which they
have to meet are greater than for a banking licence. Mortgage banks must
therefore have equity capital of at least EUR 33.2m. Generally speaking, only
mortgage-backed covered bonds are issued under the Slovakian regulations,
although each bank can only maintain a cover pool that is located on the
issuer’s balance sheet. The cover assets must previously have been entered
in the cover register. Substitute cover assets may be used up to a sum of 10%
of the cover pool volume, whereas derivatives are not part of the pool.
Other unrated
sub-benchmarks are
available
Where only the issuance size is used as a criterion when defining the sub-
benchmark segment, the segment comprises an outstanding volume of EUR
38.5bn, which is represented by over 140 covered bonds. This includes, for
example, the public Pfandbrief of Sparkasse Hannover, which was also issued
with joint leads in 2014, but does not have a separate rating.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 10 of 31
Conclusion Compared with the EUR-denominated benchmark segment, the sub-
benchmarks we have looked at constitute a niche market. Having said that,
they can still serve as a diversification from the traditional benchmark for
investors and also offer a higher spread in some cases. Mostly this is
accompanied by less liquidity in the respective issue. As the issuers we have
focused on in the sub-benchmark segment are generally relatively new
covered bond issuers, at least in relation to the sub-benchmark segment, we
could foresee a benchmark issue happening in the future, provided the
respective issuers have a corresponding funding requirement.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 11 of 31
SSAs Municipal Schuldscheindarlehen remain on trend
Analysts:
Norman Rudschuck, CIIA
Thomas Scholz
Municipal SSD on trend
Apart from traditional bank loans and the issue of bonds on the capital mar-
ket, Schuldscheindarlehen (SSD) play an important role in satisfying demand
for financing. Overall, the market for SSD has developed significantly in re-
cent years and accounts for an issuance volume of more than EUR 25bn in
2016. This trend, which is largely attributable to the refinancing of corporates,
also seems to be continuing among public sector issuers. Particularly among
municipal borrowers, there has been a further increase in funding via SSD
(especially in terms of the number of deals) recently, which is likely to be due,
firstly, to the benefits of the product itself and, secondly, to the increased
demand – contrary to the trend with the federal government and Länder – for
funding at municipal level. Internal information indicates that some EUR
340m divided into 18 transactions was raised in total in Q2. The deal count is
at a record level compared with previous quarters although total volume fell
slightly once more. Some EUR 800m (ytd) was raised in the market for mu-
nicipal SSD and we observed 34 deals on the markets. This leads to an av-
erage deal size of EUR 24m in 2017 (ytd).
Issuance volumes and number of municipal transactions
0
2
4
6
8
10
12
14
16
18
20
0
100
200
300
400
500
600
700
800
900
1.000
in E
UR
m
Issuance Volume (lhs) Number of issues (rhs)
Source: NORD/LB Fixed Income Research
Q3/2016 record quarter –
caused by large transactions
Looking at the issuance volumes of the last one and a half years, Q3/2016
especially is conspicuous as an outlier. In this quarter, we counted four trans-
actions each totalling over EUR 100m – which is rather unusual for this
(sub)market. Retrospectively, the market was sufficiently receptive for this
volume meaning that issue spreads did not come under too much pressure
apparently. It is striking that municipal SSD are continuing to gain in im-
portance as a means of raising outside capital, as can be seen from the
number of deals.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 12 of 31
Significant differences to
corporates – marked lack of
transparency
There is basically little transparency in the market for SSD. Among other
things, this is because bilateral credit agreements form the legal basis for the
relationship between creditors and debtors – meaning that the German Secu-
rities Trading Law (WpHG) is not applicable and consequently certain duties
of publication do not have to be met. This lack of transparency is even more
marked within the market for municipal SSD. This is primarily attributable to
the structure of the deals. While investors are often targeted in the corporates
sector whose status can be described as “non-deal-related” and consequent-
ly a certain amount of publicity is generated, deals in the municipal SSD are
far smaller on average and must be classified as “private placements”. Con-
sequently, no publicity is generated regarding the deals. This leads to the fact
there are many unknown municipal SSD deals, which naturally are not (can-
not be) recorded in our statistics.
Small deals characterise the
market for municipal SSD
The size of municipal SSD deals is another significant difference. The deals
are far smaller – the average size of corporates is around EUR 265m (munic-
ipalities EUR 24m.). The outside capital requirement of smaller municipalities,
in particular, is not comparable with (larger) corporates, particularly as munic-
ipal investments in long-term maintenance still had to be covered by munici-
palities’ relatively predictable cash inflows, which inhibits willingness to invest
under certain circumstances. Accordingly, only 2% or so of transactions ex-
ceed EUR 100m, while most of the transactions are worth EUR 10-30m.
Size distribution of municipal Schuldscheindar-lehen since Q1/2016 (number weighted by tranche)
Maturity distribution of municipal Schuldschein-darlehen since Q1/2016 (number weighted by tranche)
3.5%5.3%
10.5%
2.6%
42.1%
36.0%
up to 3 years 3 to 5 years5 to 8 years 8 to 10 years10 to 20 years longer than 20 years
15.6%
16.5%
45.9%
20.2%
1.8%
up to EUR 5m EUR 5-10m EUR 10-30m
EUR 30-100m above 100m
Source: NORD/LB Fixed Income Research Source: NORD/LB Fixed Income Research
Long maturities normal for
municipal SSD
Another perceptible difference between SSD and corporates is the maturity
of the former. While around 4% of the tranches for corporates have a maturi-
ty of over ten years, the figure for municipalities is around 78%. This differ-
ence is, firstly, attributable to differences in the risk profiles of municipalities
and corporates and, secondly, to the differences in the funding requirements
of the issuer categories.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 13 of 31
Pricing of municipal SSD
very tight
According to our information, the pricing of municipal SSD is at the bottom of
comparable corporate maturities or below it in some cases. In Q2, spreads
of highly rated municipalities on a maturity of 30 years were below ms +30bp
for instance. In comparison with this, the sovereign curve of German bonds
in this maturity is currently around ms -32bp. If one assumes that the current
issue spreads of highly rated municipalities are between ms +20-30bp, they
offer a perceptible pickup compared with sovereign bonds. It should be not-
ed here that SSD are naturally (and correctly, given the smaller volumes and
very long maturities) very illiquid and consequently a buy-and-hold strategy
should be assumed for the acquisition of a municipal SSD to make sense
from an investor’s perspective.
Conclusion – municipal SSD
remain a niche product
By and large, municipal SSD are a submarket of the SSD segment. The
market for municipal SSD is still a niche, which has, however, seen dynamic
growth in the wake of growth in the SSD market as a whole. As a rule, credit
ratings are – via the safeguarding mechanisms of the Länder or the federal
government as well – very high. Nevertheless, they offer a significant pickup
compared with sovereign bonds. However, if one looks at the long maturities
and small deals, it must be assumed that there is practically no secondary
market. The municipal SSD is therefore of interest to investors who have
long-term payment obligations and therefore want to generate highly secure
interest income above the sovereign bond curves.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 14 of 31
Covered Bonds/SSA ECB tracker
Analysts:
Matthias Melms, CIIA, CCrA
Norman Rudschuck, CIIA
In this section, we publish weekly updates on the covered bonds, ABS, specif-
ic agencies, supranationals and sovereign bonds which the European Central
Bank (ECB) is purchasing. We provide an overview of the development of
purchases.
CBPP3 –
net inflows
remain at a low level
As at the reference date of 28 July 2017, the European Central Bank (ECB)
reported a portfolio volume of EUR 225.040bn as part of the CBPP3. This
equated to an increase of EUR 408m on the previous week’s value (as at 21
July 2017: EUR 224.632bn). Here, net inflows were composed exclusively of
purchases, with no maturities falling due. Over the past four weeks, net inflows
have increased further on account of basis effects, totalling EUR 2.410bn (as
at 21 July 2017: EUR 1.795bn) at present. In terms of the ABSPP, the portfolio
volume as at 28 July rose by EUR 5m week on week (as at 21 July 2017:
EUR -44m). Net inflows in this context consisted of purchases amounting to
approximately EUR 0.2bn and maturities of around EUR 0.2bn. On account of
basis effects, the net inflows over a rolling four-week period fell to EUR 529m
(as at 21 July 2017: EUR 1,029m). Under the CSPP, there was a
week-on-week increase of just EUR 0.787bn, which only just surpasses the
previous week’s value of EUR 0.723bn. The overall volume now totals EUR
101.848bn.
PSPP purchases decline
to below EUR 9.7bn in the
previous trading week
In the previous trading week, the Eurosystem acquired bonds worth approxi-
mately EUR 9.7bn as part of the PSPP, which fell well short of the recently
accelerated pace of purchases. The purchase amount mentioned above is
again approximately EUR 2.5bn lower than recently. Welcome to the summer
recess! Accordingly, the ECB reported an increased portfolio volume of “only”
EUR 1,658.988bn as at the reference date of 28 July. The reduced purchase
amounts are still yet to filter down into the rolling four-week average. At EUR
12.4bn, this value is actually up on the EUR 11.1bn from the previous week,
after the EUR 4.35bn from 30 June following redemptions was deducted from
the rolling calculation. In the previous trading week, there were – as often
happens – some bonds purchased for the first time by the Eurosystem. Two
new ISINs from North Rhine-Westphalia in the German sub-sovereigns seg-
ment were included on the list, bringing the number of Bundesländer bonds to
have been purchased to 201 now. In addition, two welcome guests in the form
of CDEP and, once again, RESFER found their way into the Eurosystem’s
books. No bonds were purchased from the supranational segment. According
to Bloomberg, the BDF has signalled that it will again be buying four bonds
from the EFSF (2021-2033) this coming Friday.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 15 of 31
Upcoming reverse auctions (Banque de France – BDF)
ISIN Bond Central bank & date
EU000A1G0DM5 EFSF 0 03/29/21 Banque de France (04.08.)
EU000A1G0DV6 EFSF 0 1/2 07/11/25 Banque de France (04.08.)
EU000A1G0DY0 EFSF 0 7/8 07/26/27 Banque de France (04.08.)
EU000A1G0DT0 EFSF 1 1/4 05/24/33 Banque de France (04.08.)
Total targeted size: EUR 100-150m Source: BDF, NORD/LB Fixed Income Research
Completed reverse auctions (Banque de France – BDF)
ISIN Bond Central bank and date
- - -
Total targeted size: EUR 100-200m Source: BDF, NORD/LB Fixed Income Research
Completed reverse auctions (DeNederlandscheBank – DNB)
ISIN Bond Min. Mean Max Date
XS0478263816 BNG 3 ¾ 01/14/20 110.240 110.244 110.248 31.07.
XS0212342066 NEDWBK 3 ⅞ 02/17/20 31.07.
XS0873878283 BNG 1 ½ 04/15/20 31.07.
XS0537711144 BNG 2 ⅝ 09/01/20 31.07.
XS0578368143 NEDWBK 3 ½ 01/14/21 31.07.
XS1280394229 BNG 0 ½ 08/26/22 102.230 102.230 102.230 31.07.
XS1312042648 NEDWBK 0 ½ 10/27/22 31.07.
XS1547374212 BNG 0 ¼ 01/10/24 99.890 99.890 99.890 31.07.
XS1626191107 NEDWBK 0 ¼ 06/07/24 99.460 99.460 99.460 31.07.
XS1632891138 BNG 0 ⅝ 06/19/27 31.07.
Total Amount Offered EUR 119m
Total Amount Allocated EUR 50m
Source: DNB, NORD/LB Fixed Income Research
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 16 of 31
ECB purchase list for PSPP – regional issuers
Issuer Jurisdiction ISINs already purchased
BADWUR DE 8
BAYERN DE 3
BERGER DE 20
BREMEN DE 10
BRABUR DE 8
HESSEN DE 25
HAMBRG DE 9
NIESA DE 22
MECVOR DE 2
NRW DE 42
RHIPAL DE 16
SAARLD DE 4
SCHHOL DE 3
SAXONY DE -
SACHAN DE 4
THRGN DE 9
BULABO DE 1
LANDER DE 15
IDF FR 3
VDP FR 1
MADRID ES 14
CASTIL ES 1
BASQUE ES 2
ARAGON ES 1
ANDAL ES 1
WALLOO BE 3
FLEMSH BE 5
LCFB BE 1
Source: ECB, NORD/LB Fixed Income Research
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 17 of 31
ECB purchase list for PSPP
Issuer Jurisdiction ISINs already purchased
EIB SNAT 64
EFSF SNAT 40
ESM SNAT 17
EU SNAT 21
COE SNAT 8
NIB SNAT 1
EURAT SNAT -
KFW DE 51
RENTEN DE 22
NRWBK DE 49
LBANK DE 14
CADES FR 18
RESFER FR 19
UNEDIC FR 19
AGFRNC FR 17
OSEOFI FR 15
CDCEPS FR 4
CNA FR 2
ACOSS FR -
BNG NL 30
NEDWBK NL 23
NEDFIN NL 4
OBND AT 13
ASFING AT 8
FINNVE FI 5
TVRFIN FI 2
ICO ES 11
ADIFAL ES 4
CDEP IT 8
IP (REFER / ESTPOR) PT 1
SEDABI SI 1
DARSDD SI -
FADE ES 8
KUNTA FI 2
PARPUB PT 1
CASDEL IT -
AFLBNK FR 3
APHP FR -
GDCHU FR -
SPABSS FR -
SFILFR FR 1
HSGFIN IE -
FRBRTC BE -
SOCWAL BE -
FONWAL BE -
SWLBEL BE -
Source: ECB, NORD/LB Fixed Income Research
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 18 of 31
CBPP3 Overview
Weekly purchase volume [EURbn] Primary and secondary market share [EURbn]
217
218
219
220
221
222
223
224
225
226
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
19.0
5.1
7
26.0
5.1
7
02.0
6.1
7
09.0
6.1
7
16.0
6.1
7
23.0
6.1
7
30.0
6.1
7
07.0
7.1
7
14.0
7.1
7
21.0
7.1
7
28.0
7.1
7
EU
Rb
n
EU
Rb
n
Weekly purchases Total volume (rhs)
0
50
100
150
200
250
0
2
4
6
8
10
12
14
Oct-14
Dec-
14
Feb
-15
Apr-
15
Jun-1
5
Aug-1
5
Oct-15
Dec-
15
Feb
-16
Apr-
16
Jun-1
6
Aug-1
6
Oct-16
Dec-
16
Feb
-17
Apr-
17
Jun-1
7
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
Mar
-10
Jul-1
0
Nov
-10
Mar
-11
Jul-1
1
Nov
-11
Mar
-12
Jul-1
2
Nov
-12
Mar
-13
Jul-1
3
Nov
-13
Mar
-14
Jul-1
4
Nov
-14
Mar
-15
Jul-1
5
Nov
-15
Mar
-16
Jul-1
6
Nov
-16
Mar
-17
Jul-1
7
CBPP1 [EUR 7,5bn] CBPP2 [EUR 4,9bn] CBPP3 [EUR 225bn]
Source: Bloomberg, NORD/LB Fixed Income Research current volume in [ ]
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 19 of 31
PSPP overview
Weekly purchase volume [EUR bn] Distribution by country at month-end [EUR bn]
1450
1500
1550
1600
1650
1700
0
3
6
9
12
15
19.0
5.1
7
26.0
5.1
7
02.0
6.1
7
09.0
6.1
7
16.0
6.1
7
23.0
6.1
7
30.0
6.1
7
07.0
7.1
7
14.0
7.1
7
21.0
7.1
7
28.0
7.1
7
Weekly purchases Total volume (rhs)
0
40
80
120
160
200
240
280
320
360
400
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% 391,895 392,231 -336 7.14 7.22 -0.1
FR 20.7% 315,244 314,079 1,165 7.61 8.03 -0.4
IT 18.0% 274,086 273,127 959 8.53 7.74 0.8
SNAT 0.0% 177,927 177,894 33 7.44 8.16 -0.7
ES 12.9% 194,791 194,596 195 8.51 7.84 0.7
NE 5.9% 87,808 87,879 -71 7.58 8.28 -0.7
BE 3.6% 54,830 54,628 202 10.22 10.17 0.1
AT 2.9% 43,563 43,404 159 9.23 8.12 1.1
PT 2.6% 28,145 28,832 -687 8.85 7.14 1.7
FI 1.8% 25,480 25,690 -210 7.20 7.42 -0.2
IE 1.7% 21,787 22,058 -271 8.73 8.53 0.2
SK 1.1% 9,765 10,053 -288 8.22 8.41 -0.2
SI 0.5% 5,787 5,864 -77 9.33 10.77 -1.4
LU 0.3% 2,079 2,161 -82 5.65 7.03 -1.4
LV 0.4% 1,579 1,736 -157 7.94 8.56 -0.6
LT 0.6% 2,620 2,862 -242 6.82 10.17 -3.4
MT 0.1% 956 984 -28 11.03 10.19 0.8
CY 0.2% 215 2,869 -2,654 4.69 5.30 -0.6
EE 0.3% 65 203 -138 1.03 0.00 1.0
GR 0.0% 0 0 0 - 18.85 -
Total / average
100.0% 1,638,624 - - 7.90 8.08 -0.2
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 2 August 2017
NORD/LB Fixed Income Research
Page 20 of 31
Covered Bonds Charts & Graphs
Outstanding volume (Bmk.) Top 10 countries (Bmk.)
21.2%
17.4%
11.7%8.1%
5.5%
4.9%
4.7%
4.3%
3.2%
3.2%
15.8%
EUR 1062.1bn
FR
ES
DE
IT
NL
GB
CA
NO
AT
SE
Others
Country Vol. (€bn) No. of CBs ØVol. (€bn) Vol. weight.
ØMod. Duration
FR 225.6 181 1.2 4.3
ES 185.2 143 1.3 3.3
DE 124.3 191 0.7 4.0
IT 86.1 89 1.0 3.4
NL 58.1 47 1.2 5.6
GB 51.8 46 1.1 3.8
CA 49.6 40 1.2 3.0
NO 45.3 46 1.0 3.5
AT 34.0 53 0.6 4.1
SE 33.8 36 0.9 4.1
Issue volume by year (Bmk.) Maturities next 12 months (Bmk.)
0
50
100
150
200
250
300
350
2012 2013 2014 2015 2016 2017
EU
Rb
n
ATAUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPLPTSESGTR
0
5
10
15
20
25
07/1
7
08/1
7
09/1
7
10/1
7
11/1
7
12/1
7
01/1
8
02/1
8
03/1
8
04/1
8
05/1
8
06/1
8
EU
Rb
n
AUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPLPTSESGTR
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
PL
PT
SE
SG
70.6%
3.1%12.4%
0.7%
4.3%
3.2%0.4%
4.3%
0.8%
0.0%
0.2%
5.3%
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 2 August 2017
NORD/LB Fixed Income Research
Page 21 of 31
Covered Bonds Charts & Graphs
Spread development (last 15 issues)
HS
HN
0.1
07/2
0/2
0
AC
AS
CF 0
7/8
08/0
2/2
7
BQ
DA
U 0
1/2
07/1
0/2
2
LEED
0 1
/2 0
7/0
3/2
4
NW
IDE
1 3
/8 0
6/2
9/3
2
BZ
LN
Z 0
1/2
07/0
3/2
4
HV
B 0
1/8
10/2
6/2
3
AEG
ON
0 3
/4 0
6/2
7/2
7
SPA
BO
L 0
3/8
06/2
6/2
4
AC
AC
B 0
3/8
09/3
0/2
4
DH
Y 0
3/8
06/2
0/2
5
LB
PS
FH
0 5
/8 0
6/2
3/2
7
SEB
0 1
/4 0
6/2
0/2
4
BH
H 0
1/8
10/2
3/2
3
ISPIM
1 1
/8 0
6/1
6/2
7
-20
-10
0
10
20
30
40
50
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
3.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
HS
HN
0.1
07/2
0/2
0
AC
AS
CF 0
7/8
08/0
2/2
7
BQ
DA
U 0
1/2
07/1
0/2
2
LE
ED
0 1
/2 0
7/0
3/2
4
NW
IDE
1 3
/8 0
6/2
9/3
2
BZ
LN
Z 0
1/2
07/0
3/2
4
HV
B 0
1/8
10/2
6/2
3
AE
GO
N 0
3/4
06/2
7/2
7
SP
AB
OL 0
3/8
06/2
6/2
4
AC
AC
B 0
3/8
09/3
0/2
4
DH
Y 0
3/8
06/2
0/2
5
LB
PS
FH
0 5
/8 0
6/2
3/2
7
SE
B 0
1/4
06/2
0/2
4
BH
H 0
1/8
10/2
3/2
3
ISP
IM 1
1/8
06/1
6/2
7
EU
Rb
n
Amt. Issued Order Book Bid-to-Cover (rhs)
Spread development by country Performance (total return)
-40 -30 -20 -10 0 10 20
TRSGSEPTPLNZNONLITIE
GBFRFI
ES - SingleES - Multi
DKDECHCABEAUAT
bpΔ 3 Months Δ Week Δ Month
-5% 0% 5% 10% 15% 20%
Overall
1-3Y
3-5Y
5-7Y
7-10Y
2017 ytd
2016
2015
2014
2013
2012
Source: Bloomberg, NORD/LB Fixed Income Research
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 22 of 31
Covered Bonds Charts & Graphs
Germany & Austria France
-25
-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 maturity
AT DE - Öpfe DE - Hypfe DE - Others
-25
-20
-15
-10
-5
0
5
10
15
0 1 2 3 4 5 6 7 8 9 10
AS
W in b
p
years to maturityOF OH Structured
Nordics Other Core
-20
-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
-30
-20
-10
0
10
20
30
40
0 1 2 3 4 5 6 7 8 9 10
AS
W in b
p
years to maturity
BE CH GB LU NL PL
Overseas & Others Periphery
0
50
100
150
200
250
-20
-15
-10
-5
0
5
10
15
20
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.)
-20
0
20
40
60
80
100
120
140
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 2 August 2017
NORD/LB Fixed Income Research
Page 23 of 31
SSA Charts & Graphs
Outstanding volume (Bmk.) Top 10 countries (Bmk.)
38,7%
37,4%
11,2%
3,8%
3,6%1,4%
1,2%
0,9%
0,4%
0,3%
1,1%
5,3%
EUR 1522,5bn SNAT
GE
FR
SP
NE
AS
CA
IT
FI
PO
Others
Country Vol. (€bn) No. of bonds
ØVol. (€bn) Vol. weight.
ØMod. Duration
SNAT 588,6 131 4,5 7,0
GE 568,8 481 1,2 4,6
FR 170,8 109 1,6 5,5
SP 57,5 59 1,0 3,5
NE 55,5 57 1,0 5,1
AS 21,9 21 1,0 6,4
CA 18,9 13 1,5 5,2
IT 14,0 15 0,9 6,9
FI 6,2 8 0,8 6,0
PO 4,0 7 0,6 4,3
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 2017e
EU
Rb
n
Other
ES
AT
NL
FR
GE
SNAT
0
5
10
15
20
25
3008
/17
09
/17
10
/17
11
/17
12
/17
01
/18
02
/18
03
/18
04
/18
05
/18
06
/18
07
/18
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
SN
AT
GE
FR
SP
NE
AS
CA IT FI
PO
44,7%
12,3%
28,0% 8,6%
0,5%
2,6%
1,2%
0,3%0,1%
0,5%
2,4%
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 2 August 2017
NORD/LB Fixed Income Research
Page 24 of 31
SSA Charts & Graphs
Spread development (last 15 issues) E
FS
F 0
7/8
07/2
6/2
7
(fix
ed
)
NIE
SA
0 0
2/1
3/2
0 (
fixed)
RE
SF
ER
2 1
/4 1
2/2
0/4
7
(fix
ed
)
KF
W 1
1/8
09/1
5/3
2 (
fixed)
EF
SF
1.8
07/1
0/4
8 (
fixed)
EF
SF
0 1
/2 0
7/1
1/2
5
(fix
ed)
ICO
0.1
07/3
0/2
1 (
fixed)
EIB
1 1
/2 1
1/1
5/4
7 (
fixed)
AD
IFA
L 0
.8 0
7/0
5/2
3
(fix
ed
)
AG
FR
NC
1 3
/8 0
7/0
5/3
2
(fix
ed
)
NIE
SA
0 5
/8 0
7/0
6/2
7
(fix
ed
)
KF
W 0
1/8
10/0
4/2
4 (
fixed)
NR
W 1
.55 0
6/1
6/4
8 (
fixed)
SA
CH
AN
0 1
/2 0
6/2
5/2
7
(fix
ed
)
CD
EP
1 1
/2 0
6/2
1/2
4
(fix
ed
)
-40
-20
0
20
40
60
80
100
120
140
160
bp
Reoffer Spread / DM Current ASW / DM
Spread development by country Performance (total return)
-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
2016
2015
2014
2013
2012
Performance (total return) by regions Performance (total return) by rating
-4% -3% -2% -1% 0% 1% 2% 3%
Supras
Agencies
Public Banks
Regions
Bundesländer
Periphery
Non-Periphery
1W
1M
3M
6M
12M
YTD
-3% -2% -1% 0% 1% 2% 3% 4%
Overall
AAA
AA
A
BBB
1W
1M
3M
6M
12M
YTD
Source: Bloomberg, NORD/LB Fixed Income Research
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 25 of 31
SSA Charts & Graphs
Germany (by segments) France (by risk weight)
-60
-50
-40
-30
-20
-10
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
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
-60
-50
-40
-30
-20
-10
0
10
20
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
-60
-50
-40
-30
-20
-10
0
10
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
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 2 August 2017
NORD/LB Fixed Income Research
Page 26 of 31
Appendix Publication overview
Publication Topics
29/2017 26 July Market overview
USD funding in comparison with EUR issue
Bank Gospodarstwa Krajowego (BGK)
ECB Tracker
28/2017 19 July Market overview
mBank planning EUR-denominated sub-benchmark
EIOPA’s recommendation for changes to guarantees given by regional
governments and local authorities
ECB Tracker
27/2017 12 July Market overview
Rising yields in the covered bond market
Issuer Guide Preview – an overview of the German Bundesländer
ECB Tracker
26/2017 5 July Market overview
Covered Bonds – Half-year review and outlook
Overview of PSPP holdings
ECB Tracker
25/2017 28 June Market overview
Influence of the ECB in the primary market
Outlook for the second half of the year
Stability Council assembled for the 15th meeting
ECB Tracker
24/2017 21 June Market overview
Kommunalkredit plans social covered bond
Review of H1 2017
ECB Tracker
23/2017 14 June Market overview
Relative value among rates products
ECB Tracker
22/2017 7 June Market overview
Santander takes over Banco Popular
Commerzbank surrenders licence for ship Pfandbriefe
Overview of PSPP holdings
ECB Tracker
21/2017 31 May Market overview
European Commission presents impact study on harmonisation
German Bundesländer – heavyweight in the sub-sovereign segment
ECB Tracker
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 27 of 31
Appendix Contacts
Fixed Income Research
Michael Schulz Head +49 511 361-5309 [email protected]
Kai 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]
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]
Norman Rudschuck Public Issuers +49 511 361-6627 [email protected]
Thomas Scholz Public Issuers +49 511 361-4710 [email protected]
Charline Strauch Corporates / Retail Products +49 511 361-2722 [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)
Thorsten Bock [email protected] Michael Reinsch [email protected]
Dr. Julka Deimling [email protected] Gabriele Schneider [email protected]
Uwe Kollster [email protected] Dirk Scholden [email protected]
Rainer Nabel [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]
Thorsten Aberle [email protected] Stefan Krilcic [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]
Sebastian Evers [email protected] Thomas Schmidt [email protected]
Sascha Goetz [email protected] Brian Zander [email protected]
Sales Asia (+65 64 203136) Anna Tea (Head) [email protected] Caroline Lim [email protected]
Jefferson Ko [email protected]
Fixed Income / Structured Products Sales Europe (+352 452211-515)
René Rindert (Head) [email protected] Patricia Lamas [email protected]
Petteri Kaijalainen [email protected] Laurence Payet [email protected]
Morgan Kermel [email protected]
Corporate Sales
Shipping / Aircraft +49 511 9818-8150 Corporate Clients +49 511 9818-4003
Real Estate / Structured Finance
+49 511 9818-8150 FX/MM
+49 511 9818-4006
Syndicate / DCM (+49 511 9818-6600)
Thomas Cohrs (Head) [email protected] Alexander Malitsky [email protected]
Maron Grimme [email protected] Julien Marchand [email protected]
Axel Hinzmann [email protected] Wlada Pesotska [email protected]
Thomas Höfermann [email protected] Andreas Raimchen [email protected]
Tobias Jesswein [email protected] Udo A. Schacht [email protected]
Markus Klingbeil [email protected] Marco da Silva [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 & Regions +49 511 9818-9550
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 28 of 31
Disclaimer
This investment recommendation/investment strategy recommendation (hereinafter the „Investment Recommendation”) was drawn up
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This Investment Recommendation and the information contained herein have been compiled and are provided exclusively for information
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the price of the financial instruments described in this Investment Recommendation.
Covered Bond & SSA View 2 August 2017
NORD/LB Fixed Income Research
Page 29 of 31
To the extent the financial instruments referred to herein are derivatives, they may involve an initial Negativee market value from the
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By making use of this Investment Recommendation, the Recipient shall accept the foregoing terms and conditions.
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Investment Banking Department, Telephone: 0044 / 2079725400 with any queries.
Investing in financial instruments referred to in this Investment Recommendation may expose an investor to a significant risk of losing all
of the amount invested.
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NORD/LB is partially regulated by the Autorité des Marchés Financiers for the conduct of French business. Details about the extent of
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This Investment Recommendation constitutes investment research within the meaning of Article 24(1) Directive 2006/73/EC, Article
L.544-1 and R.621-30-1 of the French Monetary and Financial Code and does qualify as research recommendation under Directive
2003/6/EC and Directive 2003/125/EC.
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None of the information contained in this Investment Recommendation constitutes a solicitation or offer by NORD/LB or its affiliates to
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Additional information for recipients in Belgium
Evaluations of individual financial instruments on the basis of past performance are not necessarily indicative of future results. It should
be noted that the reported figures relate to past years.
Additional information for recipients in Cyprus
This Investment Recommendation constitutes investment research within the meaning of the definition section of the Cyprus Directive
D1444-2007-01(No 426/07). Furthermore, this material is provided for informational and advertising purposes only and does not consti-
tute an invitation or offer to sell or buy or subscribe any investment product.
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This Investment Recommendation does not constitute a prospectus under Danish securities law and consequently is not required to be
nor has been filed with or approved by the Danish Financial Supervisory Authority as this Investment Recommendation either (i) has not
been prepared in the context of a public offering of securities in Denmark or the admission of securities to trading on a regulated market
within the meaning of the Danish Securities Trading Act or any executive orders issued pursuant thereto, or (ii) has been prepared in the
context of a public offering of securities in Denmark or the admission of securities to trading on a regulated market in reliance on one or
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orders issued pursuant thereto.
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The information contained herein describes the view of the author at the time of its publication and it must not be used by its Recipient
unless having first confirmed that it remains accurate and up to date at the time of its use.
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.
Additional information for recipients in Ireland
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
state that implement the Prospectus Directive or those measures and therefore may not contain all the information required where a
document is prepared pursuant to the Prospectus Directive or those laws.
Additional information for recipients in Luxembourg
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 2 August 2017
NORD/LB Fixed Income Research
Page 30 of 31
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
belegging kan fluctueren. In het verleden behaalde resultaten bieden geen garantie voor de toekomst).
Additional information for recipients in Poland
This Investment Recommendation does not constitute a recommendation within the meaning of the Regulation of the Polish Minister of
Finance Regarding Information Constituting Recommendations Concerning Financial Instruments or Issuers thereof dated 19 October
2005.
Additional information for recipients in Portugal
This Investment Recommendation is intended only for institutional clients and may not be (i) used by, (ii) copied by any means or (iii)
distributed to any other kind of investor, in particular not to retail clients. This Investment Recommendation does not constitute or form
part of an offer to buy or sell any of the securities covered by the report nor can be understood as a request to buy or sell securities
where that practise may be deemed unlawful. This Investment Recommendation is based on information obtained from sources which
we believe to be reliable, but is not guaranteed as to accuracy or completeness. Unless otherwise stated, all views herein contained are
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Additional information for recipients in Sweden
This Investment Recommendation does not constitute or form part of, and should not be construed as a prospectus or offering memo-
randum or an offer or invitation to acquire, sell, subscribe for or otherwise trade in shares, subscription rights or other securities nor shall
it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. This Investment Recom-
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This Investment Recommendation does not constitute an issuing prospectus pursuant to article 652a or article 1156 of the Swiss Code
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This Investment Recommendation has been prepared for informational purposes only in relation to the products contained in this materi-
al and is not, under any circumstances to be construed as an offering memorandum or as an offering of any securities for sale directly or
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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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Relevant selling restrictions, if any, are contained in the prospectus or other documentation for the respective product.
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It is advisable to examine all the terms and conditions of the services provided by NORD/LB. If necessary, Recipient of this Investment
Recommendation should consult with an expert.
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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
of shares, those shares may not be offered or sold, directly or indirectly, to the public in the Republic of Finland as defined in the Finnish
Securities Market Act (746/2012, as amended). The value of investments may go up or down. There is no guarantee to get back the
invested amount. Past performance is no guarantee of future results.
Additional information for recipients in Czech Republic
There is no guarantee to get back the invested amount. Past performance is no guarantee of future results. The value of investments
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 2 August 2017
NORD/LB Fixed Income Research
Page 31 of 31
Arrangements for the confidential treatment of sensitive customer and business data as well as for avoiding and handling conflicts of
interest
NORD/LB has separated its business divisions that may have access to sensitive customer and business data (confidential areas) from
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The disclosure of confidential information that may have an impact on the prices of securities is monitored by NORD/LB’s Compliance
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They are obliged to notify the Compliance Unit of all transactions (including external transactions) undertaken by them for their own
account or for the account or on behalf of third parties. Thus the Compliance Unit is in a position to identify all unauthorized transactions
undertaken by the analysts, such as insider trading and front and parallel running. When a Investment Recommendation involving con-
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available by the Compliance Unit upon completion of the Investment Recommendation. Any subsequent amendment of the relevant
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results of the study are not affected by the knowledge of such conflicts of interest. Further information on these matters is set forth in our
Investment Recommendation or Conflict of Interest Policy which is available from the Compliance Unit of NORD/LB upon request.
Time of going to press
2 August 2017 08:18h (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
NORD/LB or one of its affiliated companies was a co-lead manager of a consortium, which took over the last of the issues of securities placed by Natixis Pfandbriefbank in the past 12 months.
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: 46%
Neutral: 52%
Negative: 2%
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: 02.08.2017 15:57