Bonds & Notes
The German Pfandbrief
Among the European covered bond markets, the German Pfandbrief market is one of the oldest and by far the biggest market. Established by Frederick the Great of Prussia in 1770, the German Pfandbrief became the market leader and the model for the more recent covered bond markets.
The German Pfandbrief market posted above average growth – particularly in the nineties – and was thus able to cement its leading position among the European covered bond markets. The introduction of the Jumbo Pfandbrief gave the German mortgage banks access to a wider investor base and enabled the product to become established internationally. Thanks to its success in recent years, the German model has attracted a great deal of attention and has been used as the basis for drafting new and amending existing covered bond legislation.
The jumbo market segment offers a comparatively high degree of liquidity and transparency, so that it more than meets the requirements of international and institutional investors. This is reflected in particular in the following standard criteria for a jumbo issue:
- Minimum issuing volume of € 1 billion
- Standard terms for straight bonds
(fixed interest rate, bullet maturity, annual coupon payment in arrears) - Issuing syndicate with a minimum of three market makers who commit themselves to simultaneous bid and offer prices for the entire life of the Jumbo Pfandbrief
- Limiting of bid-offer spread depending on the residual maturity
Minimum standards for Jumbo Pfandbriefe can be found here
