Jumbo Pfandbriefe

Liquidity plays a special role where Jumbo Pfandbriefe are concerned. This market segment comprising large-volume Pfandbriefe takes its bearings from the liquidity requirements of trading-oriented investors.

Issue size

Jumbo Pfandbriefe must have a minimum outstanding volume of EUR 1 billion.

Market makers quote two-way prices

However, size alone does not make this market so liquid. A further decisive feature is the commitment of the syndicate Banks to quote prices including two-way bid/ask upon request of investors. The certainty to get a bid price at any time is of crucial importance for Investors with respect to liquidity and underpins that trust in the German Pfandbrief is still justified. 

Market Maker and Issuer Committee

In the summer of 2006, the Market Maker and Issuer Committee (MIC) was set up. The purpose of the MIC is to allow both sides to discuss current topics in permanent dialog, thereby ensuring that the quality of market making remains high.

Another aim of the MIC is to convene in the event of, or in the likelihood of, crisis situations in order to devise means by which the suspension of market making can be prevented or at least resumed as quickly as possible.

Success story of the Jumbo Pfandbrief since 1995

The history of the Jumbo Pfandbrief is a success story the like of which has seldom been seen on the international capital markets. The first Jumbo Pfandbrief was issued in 1995. At the end 2011, the Jumbo Pfandbrief market showed a volume of approx. EUR 150 billion.

Inspired by the success of the Jumbo Pfandbrief, other European countries created their own legal frameworks for issuing Pfandbrief-similar products. Today there is a European covered bond and Jumbo covered bond segment. The volume outstanding of Jumbo covered bonds alone came to more than EUR 1.350 billion at the end of 2011, with this market segment comprising issuers from 14 EU countries. To find out more, please visit the website of the European Covered Bond Council (ECBC).

Improvement of Secondary Market Transparency

To improve Secondary Market Transparency on 9 January 2012 the vdp-Secondary Market Transparency Initiative publication of average Jumbo-spreads started on the vdp Website. 14 Banks joins this initiative. According to the minimum standards for Jumbo Pfandbriefe the syndicate Banks participated in calculating indicative average spreads each trading day for Jumbo Pfandbriefe with a residual life of at least two years. On the Basis of the daily data reports one average Spread for each Jumbo Pfandbrief is calculated on defined calculation formula.

The publication of the average secondary market spreads in the scope of this initiative offers for the first time an overview of a whole market segment on a public domain. In particular for small and medium sized Investors this overview may offer good indications. A Quality Committee monitors on a monthly Basis the data delivery frequency and the Quality of the displayed spreads. 

Since 7 January 2013 indicative average spreads are also calculated each trading day for Pfandbriefe with an issuance volume of at least Euro 500 Million. The Limit for the residual life was also reduced to one year.

Electronic trading of Pfandbriefe

Yet another feature which satisfies the liquidity requirements of institutional investors is the trading of Jumbo Pfandbriefe on electronic trading platforms. A number of such platforms have been set up since the end of the 1990s, albeit after the finance crisis these become less important.

Liquidity combined with the traditional traits of the German Pfandbrief – top credit quality and an attractive yield pick-up over Bunds – make the German Jumbo Pfandbrief an attractive investment for domestic and international investors alike.

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