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Transcript of Covered Bond & SSA View - NORD/LB · Covered Bond & SSA View ... Destatis explained to Der Neue...
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2
Agenda Page
Market overview 2
Deutsche Bank Pfandbriefe could face higher volatility in the short term 5
Nordea restructuring forges ahead 7
ESM and EFSF present funding plan for Q4 8
ECB tracker 9
Charts & Graphs 14
Publication overview 20
Contacts 21
Find us on Bloomberg: NRDR <GO>
Issue volume – Covereds Issue volume – SSA
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01
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09
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EU
Rbn
AUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPTSESGTR
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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 5 October 2016 39/2016
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 2 of 25
Covered Bonds Market overview
Analyst:
Kai Ebeling, CIIA
Doubts about stability of
Deutsche Bank weigh on
market environment
The ongoing settlement talks between Deutsche Bank and the US Department
of Justice over potential fines amounting to USD 14bn relating to real estate
transactions in the USA prompted market players to recently question the
stability of the bank, which also adversely affected the European banking sec-
tor. As a result of the high level of uncertainty in the market, by the weekend
no euro-denominated covered bonds (benchmark volume) had been issued.
On Friday afternoon, news emerged that the US Department of Justice might
potentially reduce its claim to USD 5.4bn, which calmed the market for the
time being. New Zealand's ASB Bank utilised the more stable market envi-
ronment yesterday to place a EUR 500m bond with a maturity of 7 years (soft
bullet, extension period: 12m) at ms +13bp. As well as this deal, two issuers
mandated syndicates to conduct roadshows and subsequently place a EUR
benchmark issue. Poland's PKO Bank Hipoteczny will start to market its inau-
gural EUR benchmark issue tomorrow, simultaneously marking the debut of a
Polish issuer in EUR (benchmark) under the new Polish Covered Bond Act.
Spain's Ibercaja Banco also launched the roadshow to market its EUR
benchmark today. This will be the issuer's first benchmark bond since 2010.
Banca Popolare Emilia Issuer Country Timing ISIN Maturity Volume Spread Rating
ASB NZ 04.10.16 XS1502534461 7y € 0.5bn ms +13bp AAA / Aaa / -
Source: Bloomberg, NORD/LB Fixed Income Research (Rating: Fitch / Moody’s / S&P)
UBS seeks investor consent
for change to soft bullet
UBS is seeking consent from its investors to change two EUR-denominated
covered bond issues (UBS 3 ⅞ 12/02/19, UBS 4 04/08/22) from a hard bullet
to a soft bullet structure with 12-month extension option. Investors agreeing to
this proposal by 14 October will receive an early participation fee of 0.05% of
the nominal volume held. The final deadline is 24 October and the result is set
to be announced on 27 October. A successful vote is contingent on 75% of the
investors per series participating in the vote and 75% of these must consent to
the change. Fitch does not expect the planned change to have any impact on
the current AAA rating. However, the extension option would reduce the liquid-
ity risk, which in turn could lead to a decrease in the OC requirement. We are
not expecting any spread widening as a result of switching from a hard to soft
bullet structure, and in light of the fee would recommend investors agree to the
planned change. If the switch is successfully implemented, the EUR-
denominated benchmark segment in Switzerland will exclusively comprise
issues with a soft bullet structure.
Trader’s comment On Friday we saw a slight widening of German Pfandbriefe after covered
bonds issued by Deutsche Bank widened by a few basis points. At the start of
the week however, the bank's issues appeared to have stabilised again. Cus-
tomer trading levels were also low, with some customers using trading to in-
crease their duration.
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 3 of 25
SSA Market overview
Analysts:
Mario Gruppe, CIIA
Norman Rudschuck, CIIA
Draghi at the Bundestag –
much ado about nothing
Last week, Mario Draghi tried to drum up support for his controversial – and
not only in Germany – zero interest rate policy at the Europe Committee of the
German Bundestag. He said that with the measures it has taken, the ECB
contributed to the creation of new jobs and an economy that was performing
better. According to him, the ECB’s monetary policy had prevented the threat
of another Great Depression. In Germany, this had benefited export, for ex-
ample. In turn, savers are benefiting from an economic recovery. At present,
many investors are unlikely to be viewing the low interest rate environment
quite as calmly as the ECB chief. He also appealed to politicians, explaining
that more investment and structural reforms would be required for a future
increase in long-term interest rates. However, the ECB’s measures would first
need to have the chance to take hold fully. Ultimately, his entire visit seemed
to be much ado about nothing.
Inflation increases –
change of course for
the ECB?
In September, consumer prices in the eurozone increased by 0.4% Y/Y. This
is the highest rate of inflation recorded for almost two years. Yet, the core rate,
which is adjusted for the energy sector, among other factors, was still 0.8%
Y/Y. Accordingly, signals are not uniform for the European Central Bank.
However, since the ECB tends to focus more on inflation expectations, it is
unlikely that it will change its current monetary policy course this year. Instead,
the expansion of securities purchases is becoming more and more of a key
point on the ECB’s agenda.
Municipalities increasingly
rely on short-term funding
The latest figures published by the German Federal Statistical Office (Desta-
tis) provide proof that municipalities are taking on more short-term debt,
thereby benefiting from the current low interest rate environment. However, in
so doing, they are failing to secure an interest rate advantage for a number of
years. At the same time, this increases the risks related to municipal budgets.
Destatis explained to Der Neue Kämmerer newspaper that municipalities re-
duced long-term financing (loans, promissory notes and bonds) in core budg-
ets by more than EUR 500m in H1/2016. At the same time, short-term loans to
these public sector entities rose by EUR 1.9bn. In addition, the data highlights
that bonds are becoming increasingly important. Securities-based debt in-
creased by EUR 460m and totalled almost EUR 2.5bn at mid-year. Along with
the frequently mentioned NRWGK4 city bond issue, a bond issue by the city of
Bochum also contributed to the increase. Regardless of their increased im-
portance, bonds have remained a niche instrument in public sector financing.
Debt related to loans from banks and promissory notes currently amounts to
EUR 91bn in total.
Next tranche about
to be paid to Greece?
On 10 October 2016, eurozone finance ministers may resolve payment of the
next tranche of the rescue programme for Greece at their upcoming sched-
uled meeting. Although Greece still lags far behind in terms of the schedule for
implementing reforms, a certain level of optimism was recently evident from
Brussels. It seems that there is political willingness to release the tranche
outstanding even though Greece has only achieved a small number of the
milestones stipulated. This payment represents the EUR 2.8bn outstanding
under the EUR 10.3bn aid package, which was agreed in May this year. How-
ever, in addition to Brussels, the ECB and IMF have yet to give their approval.
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 4 of 25
Carinthia: “Things will be
settled at the end.”
After the first offer of the Austrian Land of Carinthia to Heta creditors failed in
March this year, creditors now have until Friday to accept or reject a new of-
fer. According to Finance Minister Hans Jörg Schelling, a big enough majority
had already decided in favour of the deal by yesterday and he stated that
more creditors would join them by the deadline. Carinthia’s coalition govern-
ment does not want to celebrate prematurely. Governor Peter Kaiser ex-
plained, “Things will be settled at the end.” He pointed out that creditors were
still able to withdraw their approval up to the deadline on Friday. The final
result will be available by lunchtime on Monday. An extraordinary government
meeting is scheduled for 1 p.m. and this will be followed by a regional meeting
of the Landtag. Peter Kaiser said that in this way, a threat of around EUR
11bn to Carinthia’s ongoing existence would be removed once and for all with
EUR 1.2bn.
Primary market Last week, the EIB issued a climate awareness bond with a volume of EUR
500m and maturity of 11/2037 at ms -10bp. “Green” will remain one of the key
topics for the future and the EIB is one of the major players driving this seg-
ment. In addition, the Association of German Länder (Gemeinschaft deutscher
Länder) launched a further new 10y bond issue worth EUR 1bn at ms -16bp.
CAFFIL tapped a bond by EUR 150m (maturity: 2025). SNCF Réseau took
advantage of a window of opportunity to launch a USD issue (1 billion). Fur-
thermore, the African Development Bank launched a 10y benchmark issue at
ms -10bp last Friday. This is the third transaction denominated in EUR by the
bank this year, with only four active EUR bond issues outstanding. FADE also
placed two private issues. The start of the fourth quarter was relatively
straightforward otherwise: Monday was a public holiday in Germany (Day of
German Unity). Only SAGESS announced that it had mandated banks to or-
ganise a roadshow. The intention is to launch a 12y bond issue. In addition,
the Flemish Community launched two benchmark transactions, EUR 500m for
ten years and EUR 750m for 20 years. Saxony-Anhalt was responsible for a
3y transaction in USD while the EIB opted for pound sterling as its currency of
choice for a tap issue.
Issuer Country Timing ISIN Maturity Volume Spread Rating
FLEMSH Other 04.10.2016 BE0001765198 20.0y 0.50bn ms +26bp - / Aa2e / -
FLEMSH Other 04.10.2016 BE0001764183 10.0y 0.50bn ms +5bp - / Aa2e / -
AFDB SNAT 30.09.2016 XS1501560848 10.0y 0.75bn ms -10bp AAAe / Aaae / -
LANDER GE 29.09.2016 DE000A2BN5X6 10.0y 1.00bn ms -16bp AAAe / - / -
EIB SNAT 28.09.2016 XS1500338618 21.1y 0.50bn ms -10bp - / Aaae / -
Source: Bloomberg, NORD/LB Fixed Income Research (Rating: Fitch/Moody’s/S&P)
Trader’s Comment In the primary market, the Niesa 08/24 tap issue was increased by EUR 350m
at ms -17, while Länder 10/26 was placed at a value of EUR 1bn (ms -16).
Both bonds were fairly priced. However, acceptance in the market was very
subdued. The bonds are at the issue level of the offer. As a result of poor
demand from customers and a low volume of central bank purchases in the
Länder segment, spreads widened slightly. However, at this point, no real
pressure on spreads is evident yet.
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 5 of 25
Covered Bonds Deutsche Bank Pfandbriefe could face higher volatility in the short term
Analyst:
Kai Ebeling, CIIA
Matthias Melms, CIIA, CCrA
After it became known that the US Department of Justice had claims that
could result in Deutsche Bank being ordered to pay a fine of up to USD 14bn
due to its involvement in the US sub-prime crisis, speculation has grown in the
market that the bank might be unable to pay these claims without additional
corporate actions or asset disposals. Even though news emerged on Friday
that the potential fine is set to be reduced to USD 5.4bn, there has also been
sustained conjecture in the market that some clients in derivatives clearing
have terminated their relationship with Deutsche Bank. While spreads on sen-
ior bonds have increased by up to 150 bp (depending on maturity) in the past
four weeks, spreads on the outstanding mortgage Pfandbriefe have proven
significantly more stable. But here too there is slight selling pressure, as re-
flected in the widening of up to 5bp based on Bloomberg prices in the last ten
trading days. Consequently, Deutsche Bank's Pfandbriefe too have been una-
ble to shake the rumours off and have underperformed the Pfandbrief market,
which recorded no tightening or widening in the same period. The current de-
bate has prompted us to examine the pool and discuss developments going
forward.
Banca Popolare Emilia Programme data (30.06.2016) Spread overview – Germany
Mortgage
-20
-15
-10
-5
0
0 2 4 6 8 10
AS
W i
n b
p
maturityDB DE_Mortgage DE_Public Sector
Outstanding volume EUR 6,386.9m
Cover pool volume EUR 8,470.3m
Overcollateralisation (Committed / Current) 2.0% / 32.6%
Main collateral type 59.6% residential mortgages
Country 100% Germany
Number of borrowers1
59,641
Number of loans1
80,838
ØLTV (unindexed / indexed) 54.0% / n/d
Fixed interest rate (Cover Pool / CBs) 98.3% / 90.8%
WAL1
(Cover pool / CBs) 18.1y / 4.6y
CB Rating (Fitch / Moody’s / S&P) - / Aaa / -
Source: Issuer, Moody’s, NORD/LB Fixed Income Research 1 March 2016
Source: Bloomberg, NORD/LB Fixed Income Research
Banca Popolare Emilia Characteristics of cover
pool
At the end of H1 2016, the volume of Deutsche Bank's (DB) outstanding mort-
gage Pfandbriefe stood at EUR 6.387bn, while the cover pool volume
amounted to EUR 8.470bn. This produces a nominal overcollateralisation ratio
of 32.6%. The ratio in terms of net present value was somewhat higher at
48.5%. The origin of all collateral in the cover pool is Germany. At 59.6% the
largest share is attributable to residential cover assets, followed by multi-
family housing (25.5%) and commercial assets (12.1%). Substitute cover as-
sets make up the remaining 2.8%.
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 6 of 25
Rating and other indicators With an average loan per debtor of EUR 142,021 (or EUR 104,781 per loan)
the level of granularity is high. The average loan to value (LTV unindexed)
stands at 54.0%. As most of the assets in the cover pool and the covered
bonds carry a fixed rate of interest (98.3% and 90.8% respectively), the inter-
est rate risk is low due to the low mismatch level. The discrepancy in average
residual maturity (WAL) is much higher. While the cover assets have a WAL
of 18.1 years, the same indicator for the outstanding issues is only 4.6 years.
Moody’s assigns DB's mortgage Pfandbriefe a rating of Aaa. In addition, the
Timely Payment Indicator (TPI) is "High". This indicator measures the likeli-
hood that payment obligations will be met on time following issuer default and
distinguishes between six different levels ranging from "Very High" to "Very
Improbable". This produces a TPI Leeway of two notches, which means that a
downgrade in the CR assessment of two notches (or more) would also lead to
a downgrade in the covered bond rating. Moody's assesses the quality of the
cover assets using the collateral score, with a low percentage indicating good
credit quality. The rating agency reports a value of 5.2% for Deutsche Bank's
mortgage-backed Pfandbrief programme, which is an above-average score
compared with the other German mortgage Pfandbrief programmes rated by
Moody's (median collateral score as at Q1 2016: 8.8%).
Higher volatility expected
despite high quality cover
pool
As outlined above, we consider Deutsche Bank's cover pool to be very high
quality, and this is reflected not least in a very low collateral score in Moody's
analysis. We therefore also consider the market response in relation to the
covered bonds as an indication that investors are making a clear distinction
between covered bonds and senior bonds. Nevertheless, we consider the
widening on Deutsche Bank Pfandbriefe as a warning sign that these too will
not remain immune to spillover effects and headline risk. Consequently, for the
near future we expect significantly higher volatility than the market average for
Deutsche Bank Pfandbriefe. Consequently, given this higher volatility in the
future, it may appear appropriate for short-term as well as very risk-averse
investors to sell Deutsche Bank Pfandbriefe in order to protect against further
possible spread widening.
Conclusion At present, Deutsche Bank's outstanding bonds are showing a high level of
volatility due to current reporting, although the covered bonds widened by
much less than all the other paper. Even though the quality of the cover pool
for these Pfandbriefe is above average in our opinion, in the last ten trading
days they have notably underperformed the market average. Should the head-
line risks persist in the near future, we also consider a scenario possible
whereby the Pfandbriefe widen more significantly than has been the case to
date. We therefore recommend that short-term and risk-averse investors sell
Deutsche Bank Pfandbriefe in order to protect themselves against possible
spread widening.
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 7 of 25
Covered Bonds Nordea restructuring forges ahead
Analyst:
Kai Ebeling, CIIA
Nordea Bank Finland's
covered bond activities
transferred to Nordea
Mortgage Bank
After investors in some 37 outstanding covered bond issues agreed to a
change in bond terms, Sweden's Nordea Bank AB (Nordea) transferred the
covered bond activities of Nordea Bank Finland to the newly established
Nordea Mortgage Bank on 1 October of this year. The bank has therefore
taken another step forward in its restructuring, one of the aims of which is to
merge its three subsidiaries Nordea Bank Danmark, Nordea Bank Finland and
Nordea Bank Norge into one unit. While the covered bond issues transferred
to Nordea Mortgage Bank on 1 October still have a separate guarantee from
Nordea Bank Finland, ultimately resulting in an obligation on the part of
Nordea, future covered bond issues will be guaranteed by Nordea Mortgage
Bank. In an Issuer Comment published yesterday, Moody’s assessed the
transfer of covered bond activities to Nordea Mortgage Bank as "credit neu-
tral". The rating agency essentially cited the above guarantee structure for the
covered bond issues as grounds for its decision.
Banca Popolare Emilia Programme data (30.06.2016) Spread overview – Finland
Mortgage
-20
-15
-10
-5
0
0 2 4 6 8 10
AS
W i
n b
p
maturityNDASS FI
Outstanding volume EUR 17,082m
Cover pool volume EUR 23,799m
Overcollateralisation (Committed / Current) 0.0%
1 / 27,6%
Main collateral type 93% residential mortgages
Country 100% Finland
Number of borrowers
250,436
Number of loans
339,663
ØLTV (unindexed / indexed) n/d / 53,2%
Fixed interest rate (Cover Pool / CBs) 3% / 94%
1
Remaining average maturity (Cover pool / CBs) 8.4y / 3.9y
CB Rating (Fitch / Moody’s / S&P) - / Aaa / -
Source: Issuer, Moody’s, NORD/LB Fixed Income Research 1 Moody’s, March 2016
Source: Bloomberg, NORD/LB Fixed Income Research
Banca Popolare Emilia Conclusion The transfer of covered bond activities to Nordea Mortgage Bank sees the
bank take another step forward in its restructuring process. As the above
changes were approved by investors and no downgrade in the current rating
is expected, we do not expect this to have any implications for the present
spread level. Furthermore, now that the transfer of the covered bond activities
of Nordea Bank Finland to Nordea Mortgage Bank is complete, the newly
established bank can be active in the market again with benchmark bonds.
Nordea Bank Finland currently had 9 issues with a volume of EUR 11.0bn in
the iBoxx EUR Covered index and is also the biggest issuer in the Finnish
covered bond market (EUR benchmark volume of all Finnish issuers: EUR
23.0bn). While a total of three benchmark issues were carried out by the issu-
er last year, the bank has not launched any bonds yet this calendar year; we
therefore expect to see new issues from Nordea Mortgage Bank in the future.
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 8 of 25
SSAs ESM and EFSF present funding plan for Q4
Analyst:
Norman Rudschuck, CIIA
Bailout fund has already
issued registered bonds (N
bonds) worth EUR 580m
Last week, the ESM and EFSF published their detailed funding plan for the
fourth quarter of 2016. In the newsletter, Kali Anev Janse, who has been re-
sponsible for the funding of the rescue organisations since April 2016, stated
that Europe would still have the required economic power after Brexit. In addi-
tion, he praised former recipient countries under the programme, Spain and
Ireland, for their above-average growth compared with other industrialised
nations. Since the start of this year, registered bonds (N bonds) worth EUR
580m have been issued. We previously mentioned these bonds in an issue of
this publication in the second quarter of this year. This is important in view of
the fact that the EFSF and ESM intend to arrange further private placements
in this format in the future, which is set to result in less funding based on
benchmark formats, as indicated in the table below.
Long-term funding plan for 2016 (EUR bn)
Q1/2016 Q2/2016 Q3/2016 Q4/2016 2016
EFSF 6.0 5.0 1.0 2.0 14.0
ESM 6.0 6.0 7.0 6.0 25.0
Windows for ESM and EFSF bond issues Windows for ESM bill auctions
CW 41 10 to 14 October 3m 6m
CW 43 24 to 28 October October 4 (Tuesday) 18 (Tuesday)
CW 45 07 to 11 November November 8 (Tuesday) 22 (Tuesday)
CW 47 21 to 25 November December 6 (Tuesday) No auction
Source: ESM and EFSF, NORD/LB Fixed Income Research; CW = calendar week
ESM and EFSF confirm
funding plan for Q4
In the first three quarters of the year, the two financial aid programmes al-
ready raised EUR 12bn and EUR 19bn respectively. This represents six
sevenths of the facility’s funding requirement, but only 76% of that of the
mechanism. The fourth quarter starting now will see a similar level of activity
in total as the previous quarter, with a further EUR 8bn. According to plans in
place, both players will remain active in the primary market in the long term
and continue to launch bond issues.
Comparison with previous
funding plans
The EFSF’s funding target has remained at a steady level. At the same time,
the ESM was able to reduce its original target of EUR 25.5bn slightly by EUR
0.5bn, since a total of EUR 580bn has already been raised through issuing N
bonds. There still is a requirement for increased activities – partly due to
ECB buying under the expanded asset purchase programme (EAPP). It has
also emerged that issues will not and cannot always involve new bonds, as
there is the option of tapping each ISIN. Nonetheless, the ESM launched a
new 26y maturity. This is the third longest maturity of bonds ever issued.
Conclusion and outlook From a funding perspective, the ESM and EFSF have very successfully
completed the first three quarters of this year. In addition to the EUR 12bn
and EUR 19bn raised respectively, further registered bonds were privately
placed. Spain, Ireland and Cyprus left (were able to leave) the bailout fund
during this period. This means that there is no additional funding require-
ment. Nevertheless, financial assistance programmes have remained popu-
lar issuers in the primary market.
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 9 of 25
Covered Bonds/SSA ECB tracker
Analysts:
Kai Ebeling, CIIA
Norman Rudschuck, 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.
CBPP3 purchases
concentrated on secondary
market during September
As at the reference date of 30 September, the ECB reported a portfolio vol-
ume totalling EUR 194.304bn purchased so far as part of the PSPP. In
comparison with the previous week, the portfolio’s value rose by EUR
0.430bn, although the pace of weekly net inflows once again dropped off in
comparison with the previous week’s value (as at 23 September: EUR
0.868bn). This development also precipitated a fall in net inflows in the past
four weeks to EUR 3.569bn (previously: EUR 4.665bn). As per usual, the
ECB published the distribution of purchases between the primary and sec-
ondary markets up to the end of the month. This revealed that central banks
purchased a total of EUR 4.2bn in September, of which EUR 1.2bn was
attributable to primary market, while a total of EUR 3.0bn was generated on
the secondary market. As in previous months, the focus was again on the
secondary market on account of the subdued primary market activity. In
terms of the ABSPP, the central bank portfolio was not subject to any net
inflows in the past reporting week, meaning that the overall volume remains
unchanged at EUR 20.265bn. On account of basis effects, net inflows in the
past four weeks increased to EUR 355m, which represents the highest val-
ue since the end of July this year. The ECB purchased further bond holdings
as part of the CSPP totalling EUR 1.854bn, raising the overall volume to
EUR 29.722bn.
Weekly PSPP purchases
significantly below recent
levels at EUR 11.5bn
As at the reference date of 30 September, the ECB reported a portfolio vol-
ume totalling EUR 1,061.244bn purchased so far as part of the PSPP. In
comparison with the previous week, the overall value of purchased bonds
rose by just EUR 11.5bn, which is well below average. The average value
since the programme expansion to EUR 80bn per month currently stands at
EUR 15.7bn. In the previous period under review, hardly any newcomers
were included on the SSA shopping list. In the agencies segment, one ISIN
from KFW found its way into the Eurosystem’s books. This was Germany’s
largest promotional bank’s 40th ISIN. We watch with great interest on a
weekly basis for new Bundesländer bonds: in this regard, Bremen, NRW
and HESSE (x2) newly appeared on the list. The overall number of Bun-
desländer ISINs now already amounts to 58, with NRW leading the way
(21), followed by BERGER and HESSE (10 each). For its reverse auctions
on Friday, BDF’s plans are centred on two bonds from the EFSF and ESM.
Three maturities of up to 10 years in addition to one ultra-long maturity
(2047) will be targeted.
Upcoming reverse auctions (Banque de France – BDF)
ISIN Bond Central bank & date
EU000A1G0BQ0 EFSF 1 3/4 06/27/24 Banque de France (07.10)
EU000A1G0DJ1 EFSF 1 3/8 05/31/47 Banque de France (07.10)
EU000A1U9951 ESM 0 1/8 04/22/24 Banque de France (07.10)
EU000A1U9894 ESM 1 09/23/25 Banque de France (07.10)
Total targeted size: EUR 150-250m Source: BDF, NORD/LB Fixed Income Research
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 10 of 25
Completed reverse auctions (DeNederlandscheBank – DNB)
ISIN Bond Min. Mean Max Date
XS1014773128 BNG 1 ⅞ 01/14/21 109,590 109,604 109,610 03.10.
XS0578368143 NEDWBK 3 ½ 01/14/21 N/A N/A N/A 03.10.
XS1361603209 NEDWBK 0.05 02/10/21 N/A N/A N/A 03.10.
XS0695263730 BNG 3 10/25/21 116,860 116,860 116,860 03.10.
XS1280394229 BNG 0 ½ 08/26/22 N/A N/A N/A 03.10.
XS0821096418 BNG 2 ¼ 08/30/22 N/A N/A N/A 03.10.
XS1312042648 NEDWBK 0 ½ 10/27/22 104,290 104,324 104,330 03.10.
XS1346315382 NEDWBK 0 ½ 01/19/23 N/A N/A N/A 03.10.
XS1368698251 BNG 0 ¼ 02/22/23 N/A N/A N/A 03.10.
XS0630644168 BNG 3 ⅞ 05/26/23 127,070 127,070 127,070 03.10.
Total Amount Offered EUR 134m
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 10
BREMEN GE 4
BRABUR GE 1
HESSEN GE 10
HAMBRG GE 1
NIESA GE 3
MECVOR GE -
NRW GE 21
RHIPAL GE 4
SAARLD GE -
SCHHOL GE -
SAXONY GE -
SACHAN GE -
THRGN GE -
LAENDER GE 2
IDF FR 2
VDP FR 1
MADRID ES 6
CASTIL ES 1
BASQUE ES 1
ARAGON ES 1
WALLOO BE 1
LCFB BE 1
Source: ECB, NORD/LB Fixed Income Research
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 11 of 25
ECB purchase list for PSPP
Issuer Jurisdiction ISINs already purchased
EIB SNAT 50
EFSF SNAT 32
ESM SNAT 14
EU SNAT 20
COE SNAT 7
NIB SNAT 1
EURAT SNAT -
KFW DE 40
RENTEN DE 16
NRWBK DE 23
LBANK DE 6
CADES FR 18
RESFER FR 14
UNEDIC FR 16
AGFRNC FR 14
OSEOFI FR 11
CDCEPS FR 3
CNA FR 2
ACOSS FR -
BNG NL 23
NEDWBK NL 18
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 5 October 2016
NORD/LB Fixed Income Research
Page 12 of 25
CBPP3 Overview
Weekly purchase volume [EURbn] Primary and secondary market share [EURbn]
180
182
184
186
188
190
192
194
196
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
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
02.0
9.1
6
09.0
9.1
6
16.0
9.1
6
23.0
9.1
6
30.0
9.1
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
Aug-1
6S
ep-1
6
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 15.6bn] CBPP2 [EUR 7.3bn] CBPP3 [EUR 194.3bn]
Source: Bloomberg, NORD/LB Fixed Income Research current volume in [ ]
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 13 of 25
PSPP overview
Weekly purchase volume [EUR bn] Distribution by country at month-end [EUR bn]
750
800
850
900
950
1000
1050
1100
5
7
9
11
13
15
17
19
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
02.0
9.1
6
09.0
9.1
6
16.0
9.1
6
23.0
9.1
6
30.0
9.1
6
Weekly purchases Total volume (rhs)
0
20
40
60
80
100
120
140
160
180
200
220
240
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% 255,072 253,510 1,562 7.88 13.85 -6.0
FR 20.7% 202,538 200,856 1,682 7.75 11.42 -3.7
IT 18.0% 176,160 173,735 2,425 9.15 7.19 2.0
SNAT 0.0% 121,377 121,618 -241 7.27 11.34 -4.1
ES 12.9% 126,387 124,617 1,770 9.57 7.13 2.4
NE 5.9% 56,956 56,405 551 7.90 12.65 -4.7
BE 3.6% 35,119 34,883 236 10.00 14.62 -4.6
AT 2.9% 27,866 27,678 188 9.32 11.93 -2.6
PT 2.6% 21,840 23,718 -1,878 9.84 7.03 2.8
FI 1.8% 17,888 17,728 160 7.61 10.60 -3.0
IE 1.7% 15,916 16,173 -257 9.38 13.48 -4.1
SK 1.1% 7,546 9,503 -1,957 7.86 11.02 -3.2
SI 0.5% 4,324 4,668 -344 8.41 9.37 -1.0
LU 0.3% 1,631 2,290 -659 5.74 15.86 -10.1
LV 0.4% 1,167 1,907 -740 6.57 7.13 -0.6
LT 0.6% 1,965 3,093 -1,128 6.57 7.26 -0.7
MT 0.1% 616 773 -157 10.81 10.10 0.7
CY 0.2% 248 1,746 -1,498 5.09 6.03 -0.9
EE 0.3% 66 732 -666 1.78 0.00 1.8
GR 0.0% 0 0
0.00 13.06 -
Total / average
100.0% 1,074,682 - - 8.35 9.43 -1.1
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 5 October 2016
NORD/LB Fixed Income Research
Page 14 of 25
Covered Bonds Charts & Graphs
Outstanding volume (Bmk.) Top 10 countries (Bmk.)
20.6%
19.8%
11.5%8.1%
5.2%
4.8%
4.5%
4.2%
3.2%
2.8%
15.4%
EUR 1069.4bn
FR
ES
DE
IT
GB
NL
NO
CA
SE
AT
Others
Country Vol. (€bn) No. of CBs ØVol. (€bn) Vol. weight.
ØMod. Duration
FR 220.1 167 1.3 4.2
ES 211.5 161 1.3 3.0
DE 122.6 185 0.7 3.9
IT 86.2 89 1.0 3.3
GB 56.0 46 1.2 3.5
NL 51.2 40 1.3 4.5
NO 48.2 46 1.0 3.2
CA 45.4 37 1.2 3.5
SE 34.4 34 1.0 3.7
AT 29.5 48 0.6 3.3
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
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
08/1
7
09/1
7
EU
Rb
n
AUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPTSESGTR
Avg. mod. duration by country (vol. weighted) Rating distribution (vol. weighted)
0
1
1
2
2
3
3
4
4
5
5
AT
AU
BE
CA
CH
CZ
DE
DK
ES FI
FR
GB IE IT LU
NL
NO
NZ
PT
SE
SG
TR
67.8%
4.3% 11.5%
0.8%
4.9%
4.1%0.4% 3.4%
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 5 October 2016
NORD/LB Fixed Income Research
Page 15 of 25
Covered Bonds Charts & Graphs
Spread development (last 15 issues)
AS
BB
NK
0 1
/8 1
0/1
8/2
3
SH
BA
SS
0 1
/8 1
0/0
5/2
6
NA
CN
0 0
9/2
9/2
3
RFLB
OB
0 3
/8 0
9/2
8/2
6
AN
ZN
Z 0
1/8
09/2
2/2
3
CC
BG
BB
0 1
/8 0
9/1
4/2
6
CFF 0.2
25 0
9/1
4/2
6
UB
IIM
0 3
/8 0
9/1
4/2
6
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
-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
3.5
4.0
4.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
AS
BB
NK
0 1
/8 1
0/1
8/2
3
SH
BA
SS
0 1
/8 1
0/0
5/2
6
NA
CN
0 0
9/2
9/2
3
RFLB
OB
0 3
/8 0
9/2
8/2
6
AN
ZN
Z 0
1/8
09/2
2/2
3
CC
BG
BB
0 1
/8 0
9/1
4/2
6
CFF
0.2
25 0
9/1
4/2
6
UB
IIM
0 3
/8 0
9/1
4/2
6
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
EU
Rb
n
Amt. Issued Order Book Bid-to-Cover (rhs)
Spread development by country Performance (total return)
-30 -20 -10 0 10 20
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 5 October 2016
NORD/LB Fixed Income Research
Page 16 of 25
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
-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
-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 maturityBE CH GB LU NL
Overseas & Others Periphery
0
50
100
150
200
250
300
-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.)
-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 5 October 2016
NORD/LB Fixed Income Research
Page 17 of 25
SSA Charts & Graphs
Outstanding volume (Bmk.) Top 10 countries (Bmk.)
37,8%
37,3%
11,1%
4,8%
4,1%1,6%
1,0%
0,7%
0,3%
0,3%
1,0%
5,0%
EUR 1462,9bn GE
SNAT
FR
SP
NE
AS
CA
IT
PO
FI
Others
Country Vol. (€bn) No. of bonds
ØVol. (€bn) Vol. weight.
ØMod. Duration
GE 552,3 474 1,2 4,2
SNAT 545,4 125 4,4 6,7
FR 162,5 104 1,6 5,4
SP 70,3 61 1,2 3,2
NE 59,6 56 1,1 4,7
AS 23,4 23 1,0 6,7
CA 15,1 11 1,4 5,2
IT 9,9 10 1,0 8,7
PO 4,8 8 0,6 4,0
FI 4,3 5 0,9 5,9
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
25
3010
/16
11
/16
12
/16
01
/17
02
/17
03
/17
04
/17
05
/17
06
/17
07
/17
08
/17
09
/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
9
10
GE
SN
AT
FR
SP
NE
AS
CA IT
PO FI
43,7%
12,7%
28,1%
7,8%
0,4%3,5%
0,8%
0,5%
0,2%
0,9%
2,7%
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 5 October 2016
NORD/LB Fixed Income Research
Page 18 of 25
SSA Charts & Graphs
Spread development (last 15 issues) F
LE
MS
H 1
10
/13
/36
(f
ixe
d)
FL
EM
SH
0 3
/8 1
0/1
3/2
6
(fix
ed
)
AF
DB
0 1
/8 1
0/0
7/2
6
(fix
ed
)
LA
ND
ER
0.1
10
/07
/26
(f
ixe
d)
EIB
0 1
/2 1
1/1
3/3
7 (
fixe
d)
UN
ED
IC 0
11
/25
/20
(fi
xe
d)
NE
DW
BK
0 3
/4 1
0/0
4/4
1
(fix
ed
)
MA
DR
ID 0
.997
09/3
0/2
4
(fix
ed
)
KF
W 0
09
/15
/23
(fi
xe
d)
RH
IPA
L 0
09/1
6/1
9 (
fixe
d)
EIB
0 1
0/1
6/2
3 (
fix
ed
)
NR
W 0
3/4
08
/16
/41
(f
ixe
d)
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
)
-40
-20
0
20
40
60
80
100
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%
Supras
Agencies
Public Banks
Regions
Bundesländer
Periphery
Non-Periphery
1W
1M
3M
6M
12M
YTD
-2% 0% 2% 4% 6% 8%
Overall
AAA
AA
A
BBB
1W
1M
3M
6M
12M
YTD
Source: Bloomberg, NORD/LB Fixed Income Research
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 19 of 25
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
-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
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
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
450
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 5 October 2016
NORD/LB Fixed Income Research
Page 20 of 25
Appendix Publication overview
Publication Topics
38/2016 28 September Market overview
PKO Bank to issue its first EUR benchmark shortly?
Will regional elections in Spain bring an movement to the political deadlock?
ECB Tracker
37/2016 21 September Market overview
DBS Bank issues inaugural covered bond in euro
Belgian regions as an investment alternative?
ECB Tracker
36/2016 14 September Market overview
Repayment structures in the covered bond market
Municipal Schuldscheindarlehen (SSDs) trending
ECB Tracker
35/2016 7 September Market overview
The market after the summer break
Overview of PSPP holdings
ECB Tracker
34/2016 31 August Market overview
Commerzbank: review after pool transfer
Savings bank Pfandbriefe in the second quarter of 2016
Debt brake? – no problem; budget surplus in the first half
ECB Tracker
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
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 21 of 25
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]
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] Toni Martikainen [email protected]
Morgan Kermel [email protected] Laurence Payet [email protected]
Patricia Lamas [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] 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 5 October 2016
NORD/LB Fixed Income Research
Page 22 of 25
Disclaimer
This investment recommendation/investment strategy recommendation (hereinafter the „Investment Recommendation”) was drawn up
by NORDDEUTSCHE LANDESBANK GIROZENTRALE („NORD/LB“). The supervisory authorities in charge of NORD/LB are the Euro-
pean Central Bank („ECB“), Sonnemannstraße 20, D-60314 Frankfurt am Main, and the Federal Financial Supervisory Authority (Bun-
desanstalt für Finanzdienstleitungsaufsicht - „BaFin“), Graurheindorfer Str. 108, D-53117 Bonn, and Marie-Curie-Str. 24-28, D-60439
Frankfurt am Main. Details about the extent of NORD/LB´s regulation by the respective authorities are available on request. Generally,
this Investment Recommendation or the products or services described therein have not been reviewed or approved by the competent
supervisory authority.
This Investment Recommendation is addressed exclusively to recipients which are professional and institutional clients in Germany, the
United Kingdom, Austria, Belgium, Italy, Spain, Denmark, Finland, Estonia, France, Greece, Ireland, Luxembourg, the Netherlands,
Poland, Portugal, Sweden, the Czech Republic, Canada, Switzerland and Cyprus (hereinafter the „Relevant Persons” or „Recipients”).
The contents of this Investment Recommendation are disclosed to the Recipients on a strictly confidential basis and, by accepting this
Investment Recommendation, the Recipients agree that they will not forward to third parties, copy and/or reproduce this Investment
Recommendation without NORD/LB’s prior written consent. The figures discussed in this Investment Recommendation are only ad-
dressed to the Relevant Persons and any persons other than the Relevant Persons must not rely on this Investment Recommendation.
In particular, neither this Investment Recommendation nor any copy thereof must be forwarded or transmitted to the United States of
America or its territories or possessions or distributed to any employees or affiliates of Recipients resident in these jurisdictions.
This Investment Recommendation was drawn up in compliance with the applicable provisions of the German Securities Trading Act
(Wertpapierhandelsgesetz) and the Regulation Governing the Analysis of Financial Instruments (Verordnung über die Analyse von
Finanzinstrumenten). In organizational, hierarchical, functional and local terms, the Research Division of NORD/LB is independent of any
divisions responsible for the issuance of securities and investment banking activities, for trading (including proprietary trading) in and
sales of securities as well as for lending activities.
This Investment Recommendation and the information contained herein have been compiled and are provided exclusively for information
purposes. This Investment Recommendation is not intended as an investment incentive. It is provided for the Recipient’s personal infor-
mation, subject to the express understanding, which is acknowledged by the Recipient, that it does not constitute any direct or indirect
offer, individual recommendation, solicitation to purchase, hold or sell or to subscribe for or acquire any securities or other financial
instruments nor any measure by which financial instruments might be offered or sold.
All actual details, information and statements contained herein were derived from sources considered reliable by NORD/LB. However,
since these sources are not verified independently, NORD/LB cannot give any assurance as to or assume responsibility for the accuracy
and completeness of the information contained herein. The opinions and prognoses given herein on the basis of these sources consti-
tute a non-binding evaluation by the analysts of NORD/LB. Any changes in the underlying premises may have a material impact on the
developments described herein. Neither NORD/LB nor its governing bodies or employees can give any assurance as to or assume any
responsibility or liability for the accuracy, adequacy and completeness of this Investment Recommendation or any loss of return, any
indirect, consequential or other damage which may be suffered by persons relying on the information or any statements or opinions set
forth in this Investment Recommendation (irrespective of whether such losses are incurred due to any negligence on the part of these
persons or otherwise).
Past performances are not a reliable indicator of future performances. Exchange rates, price fluctuations of the financial instruments and
similar factors may have a negative impact on the value and price of and return on the financial instruments referred to herein or any
instruments linked thereto. An evaluation made on the basis of the historical performance of any security does not necessarily give an
indication of its future performance.
This Investment Recommendation neither constitutes any investment, legal, accounting or tax advice nor any representation that an
investment or strategy is suitable or appropriate in the light a Recipient’s individual circumstances, and nothing in this Investment Rec-
ommendation constitutes a personal recommendation to the Recipient thereof. The securities or other financial instruments referred to
herein may not be suitable for the Recipient’s personal investment strategies and objectives, financial situation or individual needs.
Also this Investment Recommendation as a whole or any part thereof is not a sales or other prospectus. Correspondingly, the infor-
mation contained herein merely constitutes an overview and does not form the basis for an investor‘s potential decision to buy or sell. A
full description of the details relating to the financial instruments or transactions which may relate to the subject matter of this Investment
Recommendation is set forth in the relevant (financing) documentation. To the extent that the financial instruments described herein are
NORD/LB’s own issues and subject to the requirement to publish a prospectus, the conditions of issue applicable to any individual finan-
cial instrument and the relevant prospectus published with respect thereto as well NORD/LB’s relevant registration form, all of which are
available for downloading at www.nordlb.de and may be obtained, free of charge, from NORD/LB, Georgsplatz 1, 30159 Hanover, shall
be solely binding. Any potential investment decision should at any rate be made exclusively on the basis of such (financing) documenta-
tion. This Investment Recommendation cannot replace personal advice. Before making an investment decision, each Recipient should
consult an independent investment adviser for individual investment advice with respect to the appropriateness of an investment in
financial instruments or investment strategies as contemplated herein as well as for other and more recent information on certain in-
vestment opportunities.
Each of the financial instruments referred to herein may involve substantial risks, including capital, interest, index, currency and credit
risks, political, fair value, commodity and market risks. The financial instruments could experience a sudden substantial deterioration in
value, including a total loss of the capital invested. Each transaction should only be entered into on the basis of the relevant investor’s
assessment of its individual financial situation as well as of the suitability and risks of the investment.
NORD/LB and its affiliates may, for their own account or for the account of third parties, participate in transactions involving the financial
instruments described herein or any underlying assets, issue further financial instruments having terms that are the same as or similar to
those governing the financial instruments referred to herein as well as enter into transactions to hedge positions. Such actions may affect
the price of the financial instruments described in this Investment Recommendation.
Covered Bond & SSA View 5 October 2016
NORD/LB Fixed Income Research
Page 23 of 25
To the extent the financial instruments referred to herein are derivatives, they may involve an initial negative market value from the
customer’s point of view, depending on the terms and conditions prevailing as of the transaction date. Furthermore, NORD/LB reserves
the right to pass on its economic risk from any derivative transaction it has entered into to third parties in the market by way of a mirror
image counter-transaction.
Further information on any fees which may be included in the sales price is set forth in the brochure „Customer Information Relating to
Securities Transactions“ which is available at www.nordlb.de.The information set forth in this Investment Recommendation shall super-
sede all previous versions of any relevant Investment Recommendation and refer exclusively to the date as of which this Investment
Recommendation has been drawn up. Any future versions of this Investment Recommendation shall supersede this present version.
NORD/LB shall not be under any obligation to update and/or review this Investment Recommendation at regular intervals. Therefore, no
assurance can be given as to its currentness and continued accuracy.
By making use of this Investment Recommendation, the Recipient shall accept the foregoing terms and conditions.
NORD/LB is a member of the protection scheme of Deutsche Sparkassen-Finanzgruppe. Further information for the Recipient is set
forth in clause 28 of the General Terms and Conditions of NORD/LB or at www.dsgv.de/sicherungssystem.
Additional information for recipients in the UK
NORD/LB subject to limited regulation by the Financial Conduct Authority (“FCA”) und Prudential Regulation Authority (“PRA”). Details
about the extent of our regulation by the FCA and PRA are available from NORD/LB on request.
This Investment Recommendation is a financial promotion. Relevant Persons in the UK should contact NORD/LB’s London Branch,
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.
Additional information for recipients in France
NORD/LB is partially regulated by the Autorité des Marchés Financiers for the conduct of French business. Details about the extent of
our regulation by the respective authorities are available from us on request.
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.
Additional information for recipients in Austria
None of the information contained in this Investment Recommendation constitutes a solicitation or offer by NORD/LB or its affiliates to
buy or sell any securities, futures, options or other financial instruments or to participate in any other strategy. Only the published pro-
spectus pursuant to the Austrian Capital Market Act should be the basis for any investment decision of the Recipient.
For regulatory reasons, products mentioned in this Investment Recommendation may not being offered into Austria and are not available
to investors in Austria. Therefore, NORD/LB might not be able to sell or issue these products, nor shall it accept any request to sell or
issues these products, to investors located in Austria or to intermediaries acting on behalf of any such investors.
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.
Additional information for recipients in Denmark
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
more of the exemptions from the requirement to prepare and publish a prospectus in the Danish Securities Trading Act or any executive
orders issued pursuant thereto.
Additional information for recipients in Greece
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 5 October 2016
NORD/LB Fixed Income Research
Page 24 of 25
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
solely expression of our research and analysis and subject to change without notice.
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-
mendation has not been approved by any regulatory authority. Any offer of securities will only be made pursuant to an applicable pro-
spectus exemption under EC Prospectus Directive, and no offer of securities is being directed to any person or investor in any jurisdic-
tion where such action is wholly or partially subject to legal restrictions or where such action would require additional prospectuses, other
offer documentation, registrations or other actions.
Additional information for recipients in Switzerland
This Investment Recommendation has not been approved by the Federal Banking Commission (merged into the Swiss Financial Market
Supervisory Authority “FINMA” on 1 January 2009).
NORD/LB will comply with the Directives of the Swiss Bankers Association on the Independence of Financial Research, as amended.
This Investment Recommendation does not constitute an issuing prospectus pursuant to article 652a or article 1156 of the Swiss Code
of Obligations. This Investment Recommendation is published solely for the purpose of information on the products mentioned in this
advertisement. The products do not qualify as units of a collective investment scheme pursuant to the Federal Act on Collective Invest-
ment Schemes (CISA) and are therefore not subject to the supervision by the Swiss Financial Market Supervisory Authority (FINMA).
Additional information for recipients in Canada
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
indirectly in any province or territory of Canada.
No securities commission or similar regulatory authority in Canada has passed on the merits of these securities nor has it reviewed this
material and any representation to the contrary is an offence.
Relevant selling restrictions, if any, are contained in the prospectus or other documentation for the respective product.
Additional information for recipients in Estonia
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.
Additional information for recipients in Finland
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 5 October 2016
NORD/LB Fixed Income Research
Page 25 of 25
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
its other divisions (e.g. NORD/LB Research) in terms of functions and locations and/or via relevant data processing arrangements.
The disclosure of confidential information that may have an impact on the prices of securities is monitored by NORD/LB’s Compliance
Unit which is independent of its trading, operational and settlement divisions. This independent unit controls the transactions undertaken
by NORD/LB and its employees on a daily basis to ensure that they are in line with market conditions. The Compliance Unit may impose
such trading bans and restrictions as may be necessary to ensure that information, which may affect the prices of securities, is not mis-
used and to prevent confidential information from being disclosed to divisions that are only allowed to use information available to the
general public. To avoid conflicts of interest in connection with the preparation of financial analyses, the analysts of NORD/LB are
obliged to inform the Compliance Unit of any studies being drawn up and must not invest in the financial instruments handled by them.
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-
flicts of interest to be disclosed within the NORD/LB Group is drawn up, any information on such conflicts of interest will only be made
available by the Compliance Unit upon completion of the Investment Recommendation. Any subsequent amendment of the relevant
Investment Recommendation may only be made upon consultation with the Compliance Unit and when it has been ensured that the
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
5 October 2016 08:15h (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 Deutsche Bank 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: 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
Deutsche Bank 05.10.2016 Negative Covered Bonds Fundamental
Distribution: 05.10.2016 14:12