Covered Bond & SSA View - NORD/LB · Covered Bond & SSA View 10 August 2016 NORD/LB Fixed Income Research Page 2 of 25 Covered Bonds Market overview Analyst: Kai Ebeling, CIIA Primary

Please see important disclosure on the last pages.

2

Agenda Page

Market overview 2

vdp publishes §28 data for Q2 2016 4

Movement in the Bund-Länder spread – Lasting trend or temporary phenomenon? 7

ECB tracker 9

Charts & Graphs 14

Publication overview 20

Contacts 21

Find us on Bloomberg: NRDR <GO>

Issue volume – Covereds Issue volume – SSA

0

5

10

15

20

25

30

08

/15

09

/15

10

/15

11

/15

12

/15

01

/16

02

/16

03

/16

04

/16

05

/16

06

/16

07

/16

EU

Rbn

AUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPTSESGTR

0

5

10

15

20

25

30

35

09

/15

10

/15

11

/15

12

/15

01

/16

02

/16

03

/16

04

/16

05

/16

06

/16

07

/16

08

/16

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 10 August 2016 31/2016

Distribution: 10.08.2016 14:22

bbg://screens/NRDR

Covered Bond & SSA View 10 August 2016

NORD/LB Fixed Income Research

Page 2 of 25

Covered Bonds Market overview

Analyst:

Kai Ebeling, CIIA

Primary market calms in the

summer break

The summer break meant that we did not see any issuers attempting to

place a EUR-denominated benchmark covered bond in the last five trading

days. In the USD segment, Landesbank Hessen-Thüringen issued a cov-

ered bond worth USD 600m with a maturity of four years yesterday. The

pricing process initially started at ms +low/mid 50s. However, strong demand

meant that the reoffer spread could be reduced slightly and the bond was

issued at ms +50bp.

Spreads continue to fall on

the secondary market

Spreads have tightened further in all covered bond jurisdictions since the

beginning of the month. The largest movements were determined across all

countries in the 7y-10y and >10y maturity bands. In Spain, spreads on single

and multi-cédulas tightened by two to three basis points at the long end. In

comparison, the spreads on British and Danish covered bonds at the short

end (1y-3y) posted the best performance at around two basis points. The

spreads on German Pfandbriefe narrowed by roughly one to two basis

points along the entire curve. Consequently, despite the summer break, the

market for potential issues remains constructive.

BBVA launches a new

covered bond programme

Spain’s Banco Bilbao Vizcaya Argentaria (BBVA) is the first issuer in Spain

to launch a programme for issuing cédulas de internacionalización (CIs),

which has been given a rating of Aa2 by Moody’s. CIs are covered bonds,

which use export finance loans as collateral in the associated cover pools.

Unlike the situation in Germany or France, for instance, where export fi-

nance loans are used in some public sector cover pools, there has been a

special legal basis for this asset class in Spain since 2012. The reason for

the introduction of this asset class was the fear prevailing at the time that

issuers would not have sufficient cover assets to issue their cédulas hipoth-

ecarias because of the sharp fall in prices on the Spanish property market.

However, this situation has not materialised with the result that it has taken

four years for the first issuer to launch a CI programme. A distinction should

be made here between cédulas de internacionalización and bonos de inter-

nacionalización (BI), which were issued for the first time by Banco Santander

in 2015. The two most significant differences are that CIs are covered by all

export finance loans held in an issuer’s balance sheet with the exception of

cover assets already promised for issued BIs, whereas BIs are only backed

by a specific cover pool, which holds export finance loans. The second dif-

ference is to be found in the minimum overcollateralization ratios, which, at

42.9% for CIs, is above the ratio for BIs.

Trader’s comment At the beginning of the week, covered bonds which were not eligible for

CBPP3 – in particular paper from the Overseas & Others region – failed to

maintain their previous performance. Purchases concentrated primarily on

the long end of the curve where preference was given to maturities offering a

positive yield. We also saw further convergence between the spreads on first

and second class covered bonds.



Page 3 of 25

SSA Market overview

Analysts:

Mario Gruppe, CIIA

Norman Rudschuck, CIIA

H1 2016:

Uneven demand for

KfW promotion

The KfW Banking Group distributed total promotional funding of EUR 36.2bn

in H1 2016 (H1 2015: EUR 41.5bn). The domestic promotional business was

very successful during this period at EUR 26.7bn (EUR +1.0bn). Strong de-

mand in particular for financing for energy-efficient housing construction and

energy-efficient company projects contributed to the increase. There was an

especially positive trend in loan approvals in the KfW Entwicklungs-bank

division, which had almost doubled to EUR 3.1bn. Loan loss provisioning in

the credit business mildly dampened the positive earnings situation by EUR

13m. According to KfW, the valuation adjustment requirement which was

mainly in the area of export financing and project financing and in the promo-

tion of developing and emerging countries was offset by positive one-off

effects in the form of amounts received for receivables which had already

been written off. In the environmental protection promotional area, KfW

committed EUR 4.6bn (EUR -0.4bn), and individual, large-volume financings

are expected in the second half.

Olympic railway system

kick off on time

Right on time for the opening of the Olympic Games, the first stretch of the

new "VLT Carioca" light railway system went into service in Rio de Janeiro.

KfW helped finance the eco-friendly, modern, user-friendly and barrier-free

local transport system which has a total length of 13.5 km on behalf of the

Federal Ministry for Economic Cooperation and Development (BMZ) with a

loan of EUR 133m. The light railway will now be able to carry up to 8,400

people every hour, saving 324,000 tonnes of CO2 over a 25-year lifespan in

addition to 12 million car trips per year.

Fall in Spanish yields On Monday, the yield of Spanish ten-year BONOs fell below the 1% mark for

the first time. As we have already discussed on a number of occasions, low

sovereign bond yields lead to a reallocation movement to promotional banks

or regions. Although supply in the secondary market in Spain is by no means

as scarce as it is in Germany, as the Roman poet Ovid said: "Nip it in the

bud!"

Primary market In the trading week under review here (Wednesday to Tuesday), there was

an increase in foreign currency-denominated issues. However, Germany's

capital Berlin was also active in the primary market, raising EUR 250m for

eight years at ms -13bp. Furthermore, Germany's most heavily populated

state (NRW) was able to tap a 2031 bond by EUR 150m at ms -1bp and a

2026 bond by EUR 100m.

Issuer Country Timing ISIN Maturity Volume Spread Rating

- - - - - - - - / - / -

Source: Bloomberg, NORD/LB Fixed Income Research (Rating: Fitch / Moody’s / S&P)

Trader’s comment There were no new issues in benchmark format in the Länder segment. In a

week without special highlights, there was still lively demand for Bundeslän-

der. Spreads have tightened as a result of a scarcity of supply. There was

also better demand for the Canadian regions which continued to tighten.



Page 4 of 25

Covered bonds vdp publishes §28 data for Q2 2016

Analyst:

Kai Ebeling, CIIA

Hypothekenbank Frankfurt

programmes transferred to

Commerzbank

The Pfandbrief issuers forming the Verband deutscher Pfandbriefbanken

(vdp), have published their transparency reports on the composition of cover

pools for the second quarter of 2016 in accordance with §28 of the German

Pfandbrief Act (PfandBG). Reports on (almost) all member banks are pro-

vided on the vdp website. After the banking licence of Hypothekenbank

Frankfurt was returned in May this year, the cover pools (minus commercial

cover assets) and the outstanding issues were transferred to Commerzbank,

meaning that the two banks’ programmes have been combined since this

quarter. However, despite being a member, Deutsche Bank is not included in

the reporting and consequently its data has not been taken into account in

the following statements. The bank has a programme for mortgage Pfand-

briefe (Hypfe), which had an outstanding volume of EUR 6,386.9m at the

end of June. The cover pool comprised an amount of EUR 8,470.3m. Dexia

Kommunalbank also left the vdp on 31 December 2015, which is why no

data is provided on the issuer’s public sector-backed programme. We have

adjusted previous quarters accordingly to ensure the current data are com-

parable.

Development – outstanding volume Development – shares

0

50

100

150

200

250

300

350

400

450

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

in E

UR

bn

Mortgage Public Sector Ship Aircraft

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

Mortgage Public Sector Ship Aircraft

Source: Issuers, NORD/LB Fixed Income Research Source: Issuers, NORD/LB Fixed Income Research

Renewed fall in outstanding

Pfandbrief volume and cover

pools

At the end of Q2 2016, the banks reported a total outstanding Pfandbrief

volume of EUR 343.6bn. Consequently, the downward trend on the German

Pfandbrief market is continuing, with a further increase in the fall on the pre-

vious quarter compared with the preceding quarterly comparison. According-

ly, the fall on the previous quarter amounted to -3.8% q/q (Q1 2016: EUR

357.1bn). Over the year as a whole as well, the reduction amounts to a sub-

stantial -6.2% y/y (Q2 2015: EUR 366.5bn). Having risen slightly in Q1 2016,

the reported figure for cover pools fell again last quarter, meaning that the

figure at 30 June has fallen by 2.0% to EUR 449.5bn (Q1 2016: EUR

458.9bn). The average overcollateralization across all types of Pfandbrief

improved because of the lower absolute fall in the cover pool to 30.8% (Q1

2016: 28.5%). The share of mortgage Pfandbriefe also increased slightly in

the last quarter to 54.2% (Q1 2016: 53.4%).

http://www.pfandbrief.de/cms/_internet.nsf/tindex/de_pub_pfandbg.htm



Page 5 of 25

Development – Hypfe (mortgage) Development – Öpfe (public sector)

251.5

252.8

251.3

251.6

252.2

252.8

249.7

252.1

248.2

185.7

183.8

183.5

185.5

184.3

189.2

189.6

190.8

186.3

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

50

100

150

200

250

300

Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16

in E

UR

bn

Cover Pool Hypfe OC (rhs)

278.6

271.1

259.4

254.0

241.0

232.8

220.2

198.9

193.72

18.9

215.9

207.2

204.6

196.2

190.0

183.3

160.7

152.2

0%

5%

10%

15%

20%

25%

30%

0

50

100

150

200

250

300

Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16

in E

UR

bn

Cover Pool Öpfe OC (rhs)


Mortgage Pfandbriefe

register falling volumes for

the first time

In the last quarter, the increase in the outstanding volume of mortgage

Pfandbriefe, which has been a feature since Q3 2015, ground to a halt

meaning that the figure fell by 2.4% compared with the previous quarterly

figure (Q1 2016: EUR 190.8bn) and now stands at EUR 186.3bn, which

simultaneously equates to the lowest level since Q2 2015. UniCredit Bank

reported the highest maturities, at EUR 1.6bn, followed by Commerzbank’s

combined programme, at EUR 1.3bn, and Aareal Bank’s, at EUR 0.8bn.

There is still no sign of the downward trend in public sector Pfandbriefe bot-

toming out either, meaning that the outstanding volumes fell by 5.3% com-

pared with the previous quarter to EUR 152.2bn (Q1 2016: 160.7bn). Here,

the falling volumes were in particular driven by maturities at Helaba (EUR

2.8bn), LBBW (1.8bn) and UniCredit Bank (EUR 1.2bn). Thanks to a smaller

(both in relative and absolute terms) decline in cover pools, the overcollat-

eralization ratio of public sector programmes improved to 27.3% on average.

Ship and aircraft Pfandbriefe still enjoy a niche existence, with NORD/LB still

the only issuer in the “Aircraft Pfandbriefe” segment.

Development – Schipfe (ship Pfandbriefe) Development – Flugpfe (aircraft Pfandbriefe)

7.3 7.5

7.1

7.6

7.6

6.9

6.7

5.9

5.6

5.3

5.2

5.0 5.2

4.8

4.2

5.3

4.6

4.2

0%

10%

20%

30%

40%

50%

60%

70%

0

1

2

3

4

5

6

7

8

9

Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16

in E

UR

bn

Cover Pool Schipfe OC (rhs)

2.2 2

.3 2.3 2

.4

2.3

2.1

1.9

1.8 1

.9

1.0

1.0

1.0

1.0

1.0

1.0

1.0

1.0

1.0

0%

20%

40%

60%

80%

100%

120%

140%

160%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16

in E

UR

bn

Cover Pool Flugpfe OC (rhs)




Page 6 of 25

Münchener Hyp is still the

No. 1 among Hypfe issuers

Helaba is the largest Öpfe

issuer once more

Among the top 3 according to outstanding Hypfe volume, Münchener Hy-

pothekenbank (10.2%) remains in first place ahead of UniCredit Bank

(8.2%). In total, the top 10 banks account for a market share of 69.3%,

whereby their share has also increased compared with the previous quarter

(67.0%) because of the merger of Hypfra with Commerzbank. Deutsche

Bank would again be ranked eleventh if it reported via the vdp. In the case of

public sector Pfandbriefe, Landesbank Hessen-Thüringen (11.5%) consti-

tutes the issuer with the highest outstanding volume, followed by Bayerische

Landesbank (11.2%). They are still somewhat more concentrated than is the

case for Hypfe. Accordingly, the ten largest Öpfe issuers together account

for 79.6% of the outstanding volume, whereby their share has also increased

on the previous quarter (78.3%) because of the above-mentioned merger.

Market shares – Hypfe Market shares – Öpfe

10.2%

8.2%

8.2%

7.9%

6.7%

6.3%5.6%

5.6%

5.5%

5.0%

30.7%

Münchener Hyp

UniCredit

pbb

WL Bank

Commerzbank

Berlin Hyp

DG Hyp

LBBW

Aareal Bank

Helaba

Others

11.5%

11.2%

10.8%

9.6%

9.0%7.2%

7.1%

6.0%

4.0%

3.3%

20.4% Helaba

BayernLB

pbb

NORD/LB

Commerzbank

DG Hyp

WL Bank

LBBW

DeutscheHypo

Münchener Hyp

Others


Conclusion Outstanding volume has decreased further in all categories of Pfandbriefe –

with the exception of aircraft Pfandbriefe. As a result, even Hypfe have not

posted further growth, after the volume returned to recording slight increases

in the previous quarters. To what extent the fall in outstanding volume of

Hypfe is an outlier cannot be clearly answered for the moment, but to be

sure, we assume that Hypfe will remain a permanent fixture of German

banks’ funding portfolios. However, the reissue of TLTROs, which the ECB

has started since the second half of the year, could lead to some issuers

having decided or deciding to use these for funding purposes. This means

that a fall in the outstanding volume of mortgage-backed Pfandbriefe may

also be expected in the next quarter. As a result of the merger of Hypfra’s

mortgage-backed and public sector-backed programmes with Com-

merzbank, it is not just the market share of the ten largest issuers that has

increased, but also Commerzbank’s position in the ranking, with the result

that the bank now ranks fourth in the case of both types of Pfandbrief. How-

ever, since Hypfra is now being liquidated and consequently carried out no

new business, Commerzbank cannot be expected to issue a far larger

amount of Pfandbriefe in future. In our opinion, growth is only likely in Hypfe.



Page 7 of 25

SSAs Movement in the Bund-Länder spread – Lasting trend or temporary phenomenon?

Analysts:

Mario Gruppe, CIIA


ECB distorting prices

The ECB continues to have a major impact on the yield trend in the bond

markets with its bond purchases. Meanwhile, with the start of its CSPP, mar-

ket distortions have now also spread to the corporate-bond segment. Irre-

spective of this, however, a large part of the ECB's monthly purchases of

EUR 80bn is still going into the public issuers segment. Consequently, the

market for government bonds and SSAs is still subject to massive distortions.

What goes up,

must come down…

In such conditions, however, there are still occasionally interesting trading

ideas, primarily in view of a shift in the relative attraction of individual seg-

ments of the SSA and government-bond universe. In the last few weeks, for

example, the yields of Bunds and Bundesländer bonds have been converg-

ing. Immediately after the Brexit vote in the UK at the end of June, the yield

difference had risen to a temporary high. In the ten-year maturity segment,

the spread – depending on the bond – was at around 45bp. In the middle

maturity segment, the yield difference reached up to 40bp. Since then,

spreads have tightened significantly; at present, they are at around 20bp

both in the medium segment and at the long end.

Bund curve as driver of

spread movement

This trend is primarily a reflection of movements on the Bund curve. Shortly

before the Brexit decision and also immediately after the outcome of the

referendum, many investors sought the safety of Bunds, leading to a marked

fall in yields along the entire curve. Subsequently, the ten-year benchmark

bond fell to as low as -0.19%, the lowest yield level ever. Five-year German

sovereign bonds are currently yielding just below -0.60%. Although Bun-

desländer bonds have also generally followed this movement, the extent of

the fall in yields was slightly weaker. Consequently, the Bund-Länder spread

widened to its highest level so far this year at the end of June.

Yield development of selected Bundesländer

bonds vs. Bunds (10Y) Spread development of selected Bundesländer bonds vs. Bunds (10Y)

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

01.06.2016 14.06.2016 27.06.2016 10.07.2016 23.07.2016 05.08.2016

in %

Bunds 10Y NRW 0.5 04/16/2026

NIESA 0.5 06/08/2026

20

25

30

35

40

45

50

01.06.2016 14.06.2016 27.06.2016 10.07.2016 23.07.2016 05.08.2016

NRW 0.5 04/16/2026 NIESA 0.5 06/08/2026

Source: Bloomberg, NORD/LB Fixed Income Research



Page 8 of 25

Brexit uncertainties

evaporate

Since then, however, things have calmed down a little. Subsequently, the

yield of German government bonds increased moderately, while Bundeslän-

der yields moved more sideways. As a result, yield differences have nar-

rowed again significantly. There are two main reasons for this: first, the un-

certainty caused by the Brexit vote has disappeared from the market to some

extent. Although the outcome of the referendum means a more uncertain

scenario for the future, the trend since the end of June has shown that the

UK's withdrawal from the EU will be an orderly process backed by all sides

and that it will be some time before the UK finally leaves the EU. In addition,

it is as yet impossible to estimate what the actual terms of the UK's with-

drawal or what the UK's future relationship with the EU will be. Whereas the

uncertainty and safe-haven effect had more impact on Bund yields ahead of

the referendum, it is also mainly Bunds which are affected by the current

recovery.

ECB bearing in mind

potential scarcity

In addition, in our view, the ECB is one of the causes behind the tightening of

yield differences. Although it has not reacted so far to signs of scarcity of

purchasable material – especially of German government bonds, Bunds are

likely to be the first to benefit from the adjustments in the purchase pro-

gramme under discussion in the market. From our point of view, the increase

in the ISIN limits from 33% at present to 50% or even 70% and the lifting of

the deposit facility interest rate as yield floor are the most likely measures.

Although Bundesländer bonds would benefit equally from both steps, we

expect the Bundesbank then increasingly to turn to Bunds. This suggests that

the process of spread tightening seen in the last few weeks could be more

sustained than initially thought. As things stand at present, we do not expect

any fresh, noticeable widening of yield differences.

Conclusion Even in market conditions distorted by the ECB, it is possible to generate

interesting trading ideas. Recently, there was a marked tightening in the yield

difference between Bunds and Bundesländer bonds. Driven by uncertainty

prior to and immediately after the Brexit vote in the UK, the spread between

these securities had widened significantly. In the last few weeks, however,

there has been a marked countertrend. We do not expect any fresh and

marked widening of spreads at present.



Page 9 of 25

Covered Bonds/SSA ECB tracker

Analysts:

Kai Ebeling, 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 net inflows rise

slightly in the past four

weeks

As at the reference date of 5 August, the ECB reported a portfolio totalling

EUR 187.380bn as part of the CBPP3. In comparison to the previous week,

this value has therefore risen by EUR 0.746bn, with net inflows consisting

exclusively of purchases. Net inflows in the past four weeks therefore rose

again marginally to EUR 3.280bn (previously: EUR 3.064bn) On account of

the summer recess, no EUR-denominated covered bond (benchmark) pri-

mary market transactions are currently taking place, meaning that the cen-

tral banks are mostly reliant on the secondary market for their purchases.

On account of the market illiquidity, which we have mentioned several times

previously, weekly net inflows under the CBPP3 are likely to remain at very

low levels over the coming weeks as well. In the ABSPP, maturities ex-

ceeded the purchase volume slightly. This meant that, at EUR -69m, net

inflows in the previous reporting period were trending slightly downwards.

This also precipitated a fall in the net inflows over the past four weeks to a

current level of EUR 205m (previously: EUR 514m). As at the reference date

of 5 August, the purchase volume attributable to the central banks as part of

the CSPP had risen to EUR 14.978bn, meaning that the portfolio has in-

creased by EUR 1.764bn in comparison to the previous week’s value.

Weekly PSPP purchases

amount to EUR 12.4bn

The figures published on Monday afternoons have fallen significantly: for

the first time since the beginning of July, the overall volume of purchased

bonds (reference date: 5 August) fell below the EUR 15bn mark again, set-

tling at EUR 12.4bn. The summer break is making its presence felt. The

volume has only been below this level twice in the period since April. The

average weekly value since the expansion of the programme to a monthly

volume of EUR 80bn has amounted to a comparatively high EUR 16.5bn. In

the previous period under review, however, various newcomers were in-

cluded on the SSA shopping list: three different promotional banks found

their way into the Eurosystem’s books. In addition to a KfW ISIN, two further

ISINs from NRW.Bank also came from Germany. Four new NEDWBK ISINs

from the Netherlands were also included. Furthermore, a single regional

Berlin bond was purchased. There was no announcement this week as to

which four bonds the BDF would target on Friday or whether the planned

purchase volume would remain constant at between EUR 150-250m.

Upcoming reverse auctions (Banque de France – BDF)

ISIN Bond Central bank & date

Not yet published N/A Banque de France (12.08.)

N/A N/A Banque de France (12.08.)



Total targeted size: EUR 150-250m Source: BDF, NORD/LB Fixed Income Research



Page 10 of 25

Completed reverse auctions (DeNederlandscheBank – DNB)

ISIN Bond Min. Mean Max Date

XS0873878283 BNG 1 ½ 04/15/20 106,890 106,890 106,890 08.08.

XS0951381523 NEDWBK 1 ¾ 07/09/20 N/A N/A N/A 08.08.

XS0537711144 BNG 2 ⅝ 09/01/20 112,130 112,130 112,130 08.08.

XS1361603209 NEDWBK 0.05 02/10/21 N/A N/A N/A 08.08.

XS0695263730 BNG 3 10/25/21 N/A N/A N/A 08.08.

XS1166023777 BNG 0 ⅜ 01/14/22 103,300 103,314 103,330 08.08.

XS1280394229 BNG 0 ½ 08/26/22 N/A N/A N/A 08.08.

XS1312042648 NEDWBK 0 ½ 10/27/22 104,080 104,098 104,120 08.08.

XS1346315382 NEDWBK 0 ½ 01/19/23 104,050 104,050 104,050 08.08.

XS0706261368 NEDWBK 3 11/16/23 122,180 122,185 122,210 08.08.

Total Amount Offered EUR 207m

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 8

BREMEN GE 2

BRABUR GE -

HESSEN GE 6

HAMBRG GE 1

NIESA GE 2

MECVOR GE -

NRW GE 12

RHIPAL GE 3

SAARLD GE -

SCHHOL GE -

SAXONY GE -

SACHAN GE -

THRGN GE -

LAENDER GE -

IDF FR 2

VDP FR 1

MADRID ES 5

CASTIL ES 1

BASQUE ES 1

WALLOO BE 1

Source: ECB, NORD/LB Fixed Income Research



Page 11 of 25

ECB purchase list for PSPP

Issuer Jurisdiction ISINs already purchased

EIB SNAT 49

EFSF SNAT 32

ESM SNAT 14

EU SNAT 20

COE SNAT 7

NIB SNAT 1

EURAT SNAT -

KFW DE 38

RENTEN DE 16

NRWBK DE 22

LBANK DE 6

CADES FR 18

RESFER FR 13

UNEDIC FR 16

AGFRNC FR 14

OSEOFI FR 10

CDCEPS FR 3

CNA FR 2

ACOSS FR -

BNG NL 22

NEDWBK NL 16

NEDFIN NL 2

OBND AT 8

ASFING AT 7

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 -

KUNTA FI 1

PARPUB PT -

CASDEL IT -

AFLBNK FR 2

APHP FR -

GDCHU FR -

SPABSS FR -

HSGFIN IE -

FRBRTC BE -

SOCWAL BE -

FONWAL BE -

SWLBEL BE -




Page 12 of 25

CBPP3 Overview

Weekly purchase volume [EURbn] Primary and secondary market share [EURbn]

172

174

176

178

180

182

184

186

188

190

0.0

0.5

1.0

1.5

2.0

2.5

27.0

5.1

6

03.0

6.1

6

10.0

6.1

6

17.0

6.1

6

24.0

6.1

6

01.0

7.1

6

08.0

7.1

6

15.0

7.1

6

22.0

7.1

6

29.0

7.1

6

05.0

8.1

6

EU

Rb

n

EU

Rb

n

Weekly purchases Total volume (rhs)

0

20

40

60

80

100

120

140

160

180

200

0

2

4

6

8

10

12

14

Oct-14

Nov-

14D

ec-

14Ja

n-1

5F

eb-1

5M

ar-

15

Apr-

15

May-

15

Jun-1

5Ju

l-15

Aug-1

5S

ep-1

5O

ct-15

Nov-

15D

ec-

15Ja

n-1

6F

eb-1

6M

ar-

16

Apr-

16

May-

16

Jun-1

6Ju

l-16

EU

Rb

n

EU

Rb

nPrimary market Secondary market Total volume (rhs)

Source: Bloomberg, NORD/LB Fixed Income Research Source: ECB, NORD/LB Fixed Income Research

Total volume of covered bond purchase programmes [EURbn]

0

50

100

150

200

250

Jul-0

9

Nov

-09

Ma

r-10

Jul-1

0

Nov

-10

Ma

r-11

Jul-1

1

Nov

-11

Ma

r-12

Jul-1

2

Nov

-12

Ma

r-13

Jul-1

3

Nov

-13

Ma

r-14

Jul-1

4

Nov

-14

Ma

r-15

Jul-1

5

Nov

-15

Ma

r-16

Jul-1

6

CBPP1 [EUR 16,4bn] CBPP2 [EUR 7,5bn] CBPP3 [EUR 187,4bn]

Source: Bloomberg, NORD/LB Fixed Income Research current volume in [ ]



Page 13 of 25

PSPP overview

Weekly purchase volume [EUR bn] Distribution by country at month-end [EUR bn]

600

650

700

750

800

850

900

950

1000

5

7

9

11

13

15

17

19

21

27.0

5.1

6

03.0

6.1

6

10.0

6.1

6

17.0

6.1

6

24.0

6.1

6

01.0

7.1

6

08.0

7.1

6

15.0

7.1

6

22.0

7.1

6

29.0

7.1

6

05.0

8.1

6

Weekly purchases Total volume (rhs)

0

20

40

60

80

100

120

140

160

180

200

EU

Rb

n

Source: Bloomberg, NORD/LB Fixed Income Research Source: ECB, NORD/LB Fixed Income Research

Overall distribution of PSPP buying at month-end (EURbn)

Country Adjusted

distribution key1

Purchases (EUR m)

Expected purchases (EUR m)

2

Difference (EUR m)

Average time to maturity in

years

Market average in years

3

Difference in years

DE 26.3% 225,516 224,963 553 7.60 13.90 -6.3

FR 20.7% 179,160 178,366 794 7.71 11.27 -3.6

IT 18.0% 155,876 154,209 1,667 9.24 7.27 2.0

SNAT 0.0% 109,158 109,571 -413 7.05 11.23 -4.2

ES 12.9% 111,788 110,594 1,194 9.71 7.34 2.4

NE 5.9% 50,199 50,054 145 7.71 12.40 -4.7

BE 3.6% 31,038 30,952 86 9.79 14.52 -4.7

AT 2.9% 24,628 24,564 64 9.11 12.53 -3.4

PT 2.6% 20,096 20,953 -857 10.07 7.33 2.7

FI 1.8% 15,819 15,735 84 7.55 10.52 -3.0

IE 1.7% 14,237 14,332 -95 9.31 11.35 -2.0

SK 1.1% 7,290 8,277 -987 7.92 9.35 -1.4

SI 0.5% 3,952 4,120 -168 8.23 8.40 -0.2

LU 0.3% 1,621 1,968 -347 6.65 13.98 -7.3

LV 0.4% 1,050 1,459 -409 6.56 7.02 -0.5

LT 0.6% 1,844 2,438 -594 6.50 6.63 -0.1

MT 0.1% 598 670 -72 10.89 9.79 1.1

CY 0.2% 269 1,506 -1,237 5.19 6.09 -0.9

EE 0.3% 66 426 -360 1.96 0.00 2.0

GR 0.0% 0 0

0.00 13.2 -

Total / average

100.0% 954,205 - - 8.26 9.44 -1.2

1 Based on the ECB capital key, adjusted to include supras and the disqualification of Greece

.

2 Based on the adjusted distribution key.

3 Weighted average time to maturity of the bonds eligible for purchasing under the PSPP.




Page 14 of 25

Covered Bonds Charts & Graphs

Outstanding volume (Bmk.) Top 10 countries (Bmk.)

20.6%

19.8%

11.3%8.3%

5.3%

4.8%

4.2%

4.1%

3.1%

2.8%

15.6%

EUR 1077.4bn

FR

ES

DE

IT

GB

NL

NO

CA

SE

AT

Others

Country Vol. (€bn) No. of CBs ØVol. (€bn) Vol. weight.

ØMod. Duration

FR 222.1 168 1.3 4.2

ES 213.2 163 1.3 3.2

DE 121.8 184 0.7 3.9

IT 89.2 90 1.0 3.1

GB 57.2 47 1.2 3.6

NL 51.2 40 1.3 4.6

NO 45.7 44 1.0 3.0

CA 44.6 36 1.2 3.6

SE 33.9 33 1.0 3.7

AT 30.5 47 0.6 3.1

Issue volume by year (Bmk.) Maturities next 12 months (Bmk.)

0

50

100

150

200

250

300

350

2011 2012 2013 2014 2015 2016

EU

Rb

n

ATAUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPTSESGTR

0

5

10

15

20

25

30

35

40

08/1

6

09/1

6

10/1

6

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

04/1

7

05/1

7

06/1

7

07/1

7

EU

Rb

n

AUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPTSESGTR

Avg. mod. duration by country (vol. weighted) Rating distribution (vol. weighted)

0

1

2

3

4

5

6

AT

AU

BE

CA

CH

CZ

DE

DK

ES FI

FR

GB IE IT LU

NL

NO

NZ

PT

SE

SG

TR

63.0%

4.3%16.1%

0.9%

5.2%

4.1%0.4% 3.3%

2.2%

0.6%0.0%

6.1%

AAA/Aaa

AA+/Aa1

AA/Aa2

AA-/Aa3

A+/A1

A/A2

A-/A3

BBB+/Baa1

BBB/Baa2

BBB-/Baa3

BB+/Ba1

BB/Ba2

BB-/Ba3




Page 15 of 25


Spread development (last 15 issues)

CB

AA

U 0

1/2

07/2

7/2

6

CM

0 0

7/2

5/2

2

CM

ZB

0.0

5 0

7/1

1/2

4

BR

F 0

1/4

07/0

1/2

3

CA

FFIL

0 3

/8 0

6/2

3/2

5

SH

BA

SS

0.0

5 0

6/2

0/2

2

BZ

LN

Z 0

1/8

06/1

7/2

1

WS

TP 0 1

/8 0

6/1

6/2

1

ND

B 0

3/8

06/1

5/2

3

SA

BS

M 0

5/8

06/1

0/2

4

CM

ZB

0 1

/2 0

6/0

9/2

6

PM

IIM

0 5

/8 0

6/0

8/2

3

DB

0 1

/2 0

6/0

9/2

6

SR

BA

NK

0 1

/8 0

9/0

8/2

1

DEX

GR

P

0.0

5 0

9/0

8/2

1

-30

-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

CB

AA

U 0

1/2

07/2

7/2

6

CM

0 0

7/2

5/2

2

CM

ZB

0.0

5 0

7/1

1/2

4

BR

F 0

1/4

07/0

1/2

3

CA

FF

IL 0

3/8

06/2

3/2

5

SH

BA

SS

0.0

5 0

6/2

0/2

2

BZ

LN

Z 0

1/8

06/1

7/2

1

WS

TP

0 1

/8 0

6/1

6/2

1

ND

B 0

3/8

06/1

5/2

3

SA

BS

M 0

5/8

06/1

0/2

4

CM

ZB

0 1

/2 0

6/0

9/2

6

PM

IIM

0 5

/8 0

6/0

8/2

3

DB

0 1

/2 0

6/0

9/2

6

SR

BA

NK

0 1

/8 0

9/0

8/2

1

DE

XG

RP

0.0

5 0

9/0

8/2

1

EU

Rb

n

Amt. Issued Order Book Bid-to-Cover (rhs)

Spread development by country Performance (total return)

-40 -20 0 20 40 60 80

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




Page 16 of 25


Germany & Austria France

-30

-20

-10

0

10

20

30

40

50

60

0 1 2 3 4 5 6 7 8 9 10

AS

W in b

p

years to maturity

AT DE - Öpfe DE - Hypfe DE - Others

-30

-25

-20

-15

-10

-5

0

0 1 2 3 4 5 6 7 8 9 10

AS

W in b

p

years to maturityOF OH Structured

Nordics Other Core

-15

-10

-5

0

5

10

0 1 2 3 4 5 6 7 8 9 10

AS

W in b

p

years to maturityDK FI NO SE

-20

-15

-10

-5

0

5

10

15

20

25

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

350

-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.)

-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




Page 17 of 25

SSA Charts & Graphs

Outstanding volume (Bmk.) Top 10 countries (Bmk.)

37,9%

36,7%

11,1%

4,9%

4,3% 1,7%

1,0%

0,7%

0,3%

0,3%

1,0%

5,1%

EUR 1463,9bn GE

SNAT

FR

SP

NE

AS

CA

IT

PO

FI

Others

Country Vol. (€bn) No. of bonds

ØVol. (€bn) Vol. weight.

ØMod. Duration

GE 555,4 475 1,2 4,1

SNAT 537,5 123 4,4 6,8

FR 162,0 103 1,6 5,6

SP 71,3 60 1,2 3,2

NE 63,4 58 1,1 4,4

AS 24,9 24 1,0 6,4

CA 15,1 11 1,4 5,3

IT 10,7 11 1,0 8,1

PO 4,8 8 0,6 4,2

FI 4,3 5 0,9 6,1

Issue volume by year (Bmk.) Maturities next 12 months (Bmk.)

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016e

EU

Rb

n

Other

ES

AT

NL

FR

GE

SNAT

0

5

10

15

20

2508

/16

09

/16

10

/16

11

/16

12

/16

01

/17

02

/17

03

/17

04

/17

05

/17

06

/17

07

/17

EU

Rb

n

Other

ES

AT

NL

FR

GE

SNAT

Avg. mod. duration by country (vol. weighted) Rating distribution (vol. weighted)

0

1

2

3

4

5

6

7

8

9

GE

SN

AT

FR

SP

NE

AS

CA IT

PO FI

43,6%

12,7%

27,9%

7,9%

0,4%3,5%

0,8%

0,5%

0,2%

0,9%

2,8%

AAA/Aaa

AA+/Aa1

AA/Aa2

AA-/Aa3

A+/A1

A/A2

A-/A3

BBB+/Baa1

BBB/Baa2

BBB-/Baa3

BB+/Ba1

BB/Ba2

BB-/Ba3

B+/B1

B/B2

B-/B3

NR




Page 18 of 25

SSA Charts & Graphs

Spread development (last 15 issues) H

ES

SE

N 0

3/4

08/0

4/3

6

(fix

ed

)

NIE

SA

0 0

8/0

2/2

4 (

fixed)

AG

FR

NC

0 1

/4 0

7/2

1/2

6

(fix

ed

)

ES

M 0

7/8

07/1

8/4

2 (

fixed)

BA

DW

UR

0 0

7/1

9/1

8

(flo

atin

g)

RH

IPA

L 0

07

/16

/18

(fi

xe

d)

BN

G 0

.05 0

7/1

3/2

4 (

fixed)

HE

SS

EN

0 3

/8 0

7/0

6/2

6

(fix

ed

)

IDF

0 1

/2 0

6/1

4/2

5 (

fixed)

NIB

0 1

/8 0

6/1

0/2

4 (fi

xed)

CO

E 0

3/8

06/0

8/2

6 (

fixed)

ER

STA

A 0

06/0

7/1

9

(fix

ed

)

KF

W 0

06/3

0/2

1 (

fixed)

NIE

SA

0 1

/2 0

6/0

8/2

6

(fix

ed

)

BN

G 0

1/4

06/0

7/2

4 (

fixed)

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

bp

Reoffer Spread / DM Current ASW / DM

Spread development by country Performance (total return)

-30 -25 -20 -15 -10 -5 0

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

0% 1% 2% 3% 4% 5% 6% 7%

Supras

Agencies

Public Banks

Regions

Bundesländer

Periphery

Non-Periphery

1W

1M

3M

6M

12M

YTD

0% 1% 2% 3% 4% 5% 6% 7%

Overall

AAA

AA

A

BBB

1W

1M

3M

6M

12M

YTD




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

-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

-50

-40

-30

-20

-10

0

10

20

30

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

AS

W in

bp

years to maturity

Dutch agencies DSLs Austria Austrian agencies

-70

-60

-50

-40

-30

-20

-10

0

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

AS

W in

bp

years to maturity

Supranationals Supranationals Bunds OATs

Core Periphery

-40

-30

-20

-10

0

10

0 1 2 3 4 5 6 7 8 9 10

AS

W in

bp

years to maturityGerman nat. agencies Bundesländer

German reg. agencies French RW: 0%

French RW: 20% Dutch agencies

Austrian agencies Supras

-50

0

50

100

150

200

250

300

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




Page 20 of 25

Appendix Publication overview

Publication Topics

30/2016 27 July Market overview

ECBC publishes covered bond statistics for 2015

Overview of PSPP holdings

ECB Tracker


Yield levels on the covered bond market

More power to the ESM – what prompted the Bundesbank’s proposal?

ECB Tracker


Italian risk with covered bondsMoody‘s

Downward trend in yields puts ECB under growing pressure

ECB Tracker


RLB Oberösterreich assigned Aaa rating by Moody‘s


ECB Tracker


Fitch plans to change rating methodology

High issuance volume in first six months

Half-year review 2016 for SSAs

ECB Tracker

25/2016 29 June Market overview

Impact of Brexit decision on covered bonds

Varyingly strong effects expected on Public issuers

ECB Tracker


UK covered bonds reveal potential

The PSPP and yields on German bonds

ECB Tracker


Relative value for rates products

ECB Tracker


Moody’s quarterly report Q4/2015 an overview

Draghi freezes yields – a review of the ECB council meeting


ECB Tracker



Page 21 of 25

Appendix Contacts

Fixed Income Research

Michael Schulz Head +49 511 361-5309 [email protected]

Kai Niklas Ebeling Covered Bonds +49 511 361-9713 [email protected]

Mario Gruppe Public Issuers +49 511 361-9787 [email protected]

Michaela Hessmert Banks +49 511 361-6915 [email protected]

Christopher Kief Corporates / Retail Products +49 511 361-4710 [email protected]

Melanie Kiene Banks +49 511 361-4108 [email protected]

Jörg Kuypers Corporates / Retail Products +49 511 361-9552 [email protected]

Matthias Melms Covered Bonds +49 511 361-5427 [email protected]

Sascha Remus Corporates / Retail Products +49 511 361-2722 [email protected]

Norman Rudschuck Public Issuers +49 511 361-6627 [email protected]

Martin Strohmeier Corporates / Retail Products +49 511 361-4712 [email protected]

Kai Witt Corporates / Retail Products +49 511 361-4639 [email protected]

Markets Sales

Carsten Demmler Head +49 511 361-5587 [email protected]

Institutional Sales (+49 511 9818-9440)

Daniel Gutschka (Head) [email protected] Gabriele Schneider [email protected]

Thorsten Bock [email protected] Dirk Scholden [email protected]

Uwe Kollster [email protected] Uwe Tacke [email protected]

Daniel Novotny-Farkas [email protected]

Sales Savings Banks / Regional Banks (+49 511 9818-9400)

Christian Schneider (Head) [email protected] Martin Koch [email protected]

Oliver Bickel [email protected] Bernd Lehmann [email protected]

Tobias Bohr [email protected] Jörn Meißner [email protected]

Kai-Ulrich Dörries [email protected] Lutz Schimanski [email protected]

Jan Dröge [email protected] Ralf Schirrling [email protected]

Sascha Goetz [email protected] Brian Zander [email protected]

Stefan Krilcic [email protected]

Sales Asia (+65 64 203136)

Jefferson Ko [email protected] Muhammad Peter Shepherd

[email protected]

Fixed Income / Structured Products Sales Europe (+352 452211-515)

René Rindert (Head) [email protected] Patricia Lamas [email protected]

Morgan Kermel [email protected] Laurence Payet [email protected]

Corporate Sales

Schiffe / Flugzeuge +49 511 9818-8150 Firmenkunden +49 511 9818-4003

Immobilien / Strukturierte Finanzierung

+49 511 9818-8150 FX/MM +49 511 9818-4006

Syndicate / DCM (+49 511 9818-6600)

Thomas Cohrs (Head) [email protected] Wlada Pesotska [email protected]

Axel Hinzmann [email protected] Andreas Raimchen [email protected]

Thomas Höfermann [email protected] Udo A. Schacht [email protected]

Alexander Malitsky [email protected] Marco da Silva [email protected]

Julien Marchand [email protected]

Financial Markets Trading

Corporates +49 511 9818-9690 Collat. Mgmt / Repos +49 511 9818-9200

Covereds / SSAs +49 511 9818-8040 Cust. Exec. & Trading +49 511 9818-9480

Financials +49 511 9818-9490 Frequent Issuers +49 511 9818-9640

Governments +49 511 9818-9660 Structured Products +49 511 9818-9670

Länder & Regionen +49 511 9818-9550

mailto:[email protected]








Page 22 of 25

Disclaimer

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The supervisory authorities in charge of NORD/LB are the European Central Bank („ECB“), Sonnemannstraße 20, D-60314 Frankfurt

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This Analysis was drawn up in compliance with the applicable provisions of the German Securities Trading Act (Wertpapierhan-

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Page 24 of 25

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Page 25 of 25

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Time of going to press

10 August 2016 08:34h (CET)

Disclosure of NORD/LB’s potential conflicts of interest according to § 34b Abs. 1 WpHG and

§ 5 FinAnV

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Additional disclosures

Sources and price indications

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Recommendation system and history of last 12 months

Positive: Positive expectations for the issuer, a security type or a specific security of an issuer.

Neutral: Neutral expectations for the issuer, a security type or a specific 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.

Issuer / security Date Recommendation Bond type Cause

Documents

Covered Bond & SSA View - NORD/LB · Covered Bond & SSA View 10 August 2016 NORD/LB Fixed Income Research Page 2 of 25 Covered Bonds Market overview Analyst: Kai Ebeling, CIIA Primary