Business Development

REFINANCING

The Pfandbrief market remained influenced by the ECB’s third Covered Bond Purchase Programme (CBPP3). Furthermore, investors were at times hesitant to act due to political events and especially because of the Brexit vote and the results of the American presidential election. Finally, there was the volatility noted in interest markets towards the end of the year. Despite these, more difficult overall conditions we were able to fully cover our refinancing needs to our complete satisfaction.

During the year under review we only had to service one large volume security – a € 1.25 billion Mortgage Pfandbrief – that matured. Repayment took place at the beginning of the year and had already been partially prepared by measures taken in 2015. This allowed us to primarily focus on managing our liquidity and choosing good windows for new issues over the remaining course of the year.

In April, we placed a new benchmark issue, a ten-year € 500 million Mortgage Pfandbrief with a 0.5 percent coupon. The issue was priced at one basis point below the mid-swap rate, which was the highest risk discount in this maturity segment up to this date in 2016. A total of 44 orders were received from ten countries with German investors counting as the largest group as they bought almost 79 percent of the volume sold. Refinancing conditions improved again later in the year enabling the Bank to successfully tap this issue by an additional € 250 million in July. The price was set at 8 basis points below the mid-swap rate underlining our outstanding placement power.

During 2016 we bolstered our issues of foreign currency denominated Mortgage Pfandbriefe. About 40 percent of MünchenerHyp’s total covered refinancing volume was accounted for by Pfandbriefe that were not denominated in euros. We owe this to our many years of intensive relationships with our investors, especially those in Europe, overseas and in the Far East.

Highlights of our foreign currency denominated issues in 2016:
  • A 225 million pounds sterling Mortgage Pfandbrief placed in January 2016.
  • A benchmark three-year Mortgage Pfandbrief for 600 million US dollars issued in July and carrying a coupon of 1.375 percent. This issue met with very strong international demand and was placed with investors located in 14 countries on three continents. About three-quarters of the volume issued were bought by supranational institutions, state-owned funds and agencies.
  • In addition, we repeatedly issued Mortgage Pfandbriefe denominated in Swiss francs, including a 2-year Mortgage Pfandbrief with a volume of 200 million Swiss francs and a coupon of 0.01 percent.

MünchenerHyp received the Deal of the Year Award from mtn-I, a well-known international data platform for fixed-income securities, for the last mentioned Mortgage Pfandbrief in Swiss francs.

The total volume of issues placed in 2016 amounted to almost € 5 billion, of which Mortgage Pfandbriefe accounted for € 2.8 billion in covered refinancing, while unsecured bonds totalled € 2.1 billion. Due to the direction of MünchenerHyp’s business strategy the Bank did not issue any Public Pfandbriefe.