DZ HYP publishes German Pfandbrief Market Report 2019/2020

The history of the German Pfandbrief system stretches right back to 29 August 1769. Germany’s longest-serving financial product is thus celebrating its 250th anniversary. Pfandbriefe issued today differ profoundly from those placed back in 1769. What unites them is their security. This is because the legal basis for the security of Pfandbriefehas been continually adapted and developed. As we approach the end of the current decade, harmonisation of the European covered bond legislation is moving into focus. The bill submitted in 2018 will bring about new amendments to the German Pfandbrief Act, even though these will be limited in a European comparison. In the past, Mortgage Pfandbriefe contributed to reducing the housing shortage in Germany after the two world wars, amongst other achievements. Nowadays, the market is very clearly focused on the challenges of climate change. Preferential terms for ‚green‘ mortgages may help to promote the energy modernisation of existing properties, or to implement higher standards for new construction. Following the current phase of fundamental groundwork, in the course of which a greater degree of standardisation and harmonised definitions are being established, this market is expected to grow significantly.

The European impact on the German Pfandbrief market is of great importance. With its monetary policy measures, the European Central Bank impacts the yields and risk premia for European covered bonds. In fact, many Pfandbriefe are already traded with a negative yield, due to the ECB‘s persistent easing. On the occasion of their 250th birthday, Pfandbriefe nonetheless offer a yield mark-up over German government bonds. „The German Pfandbrief Market 2019/2020“ gives an overview of current market developments; it also takes an in-depth look at the harmonisation of covered bond legislation in the light of 250 years of Pfandbrief history. We also analyse current discussions concerning digitalisation, and outline the legal basis for Pfandbriefe in detail.