The 1997 Guide to Germany: Pfandbriefe

Europe's largest bond market

Over the last two years one of the most important trends within the German capital market has been the internationalization of the Pfandbrief market. The process has evolved as German issuers have acknowledged that over the longer term they can reduce their overall borrowing costs if they diversify away from their historical reliance on the domestic investor base. At the same time, international investors have increasingly recognised that the Pfandbrief market, which has now become the largest European bond market in terms of total volume outstanding, is simply too large for them to overlook. By the end of 1996, the market was worth a total of Dm1,431 billion. In total, the Pfandbrief sector now accounts for 36% of the entire German fixed income market, compared to 26.5% for federal government bonds, 19.3% for other banks bonds, 11.9% for eurobonds and 6.3% for other public sector bonds.

Important market developments in 1996

For the German Pfandbrief market, 1996 was a critical year and one which reconfirmed that the instrument had gained popular international acceptance as a liquid alternative to the German government bond market offering the enviable attraction of a healthy yield pick up over Bunds - of between 10 and 30 basis points ­ twinned with proven stability and creditworthiness.