Europe Suspends Mortgage Bond Trading Between Banks

WOW! Desperation ? If you don´t like the quotes just shut down the market until things get better...? Credit Crunch at its best.... Mish has more on this topic

But when even the German Pfandbrief market is affected you know that something very serious and maybe irrational is happening. The German Pfandbrief is probably one of the safest bonds out there.

Verband Deutscher Pfandbriefbanken

To guarantee the high standard of safety of Mortgage Pfandbriefe at all times, besides the prudent determination of the mortgage lending value only parts of a loan up to 60% of the mortgage lending value are included in cover. Pfandbrief banks can also provide finance above the 60 % lending limit. However, these parts of the loan must not be funded through Mortgage Pfandbriefe.

And remember we are talking about German real estate that is flat for almost a 10 to 15 years and didn´t have any excess in lending practices etc....... The other states that are issuing covered bonds have a less ( often significantly) "tight" restriction and of course way often very inflated collateral........

Wenn das nicht nach einem leichten Anflug von Verzweiflung klingt Denke die Bezeichnung "Credit Crunch" ist hier keineswegs untertrieben..... Zeitenwende hat mehr zu diesem Thema.

Wenn aber selbst der Deutsche Pfandbriefmarkt betroffen ist dann ist wirklich was teilweise irrationales am laufen. Immerhin handelt es sich bei den Pfandbriefen um die wohl sichersten Papiere die zu bekommen sind. Zudem sind die zugrundeliegenden Sicherheiten im Gegensatz zu anderen Anlageklassen die letzten 10-15 Jahre nicht vom Fleck gekommen. In anderen Ländern sind die Sicherheiten der Covered Bonds nicht so weitreichend wie bei den Pfandbriefen. Zudem müssen diese sich dazu noch mit dem Problemen herumschlagen das die zugrundeliegenden Sicherheiten doch erheblich "infaltioniert" sind....

Verband Deutscher Pfandbriefbanken

Um die hohe Sicherheit der Hypotheken-Pfandbriefe jederzeit zu garantieren, werden zusätzlich zu der vorsichtigen Ermittlung des Beleihungswertes nur Darlehensteile bis zu 60% des Beleihungswertes in Deckung genommen

Europe Suspends Mortgage Bond Trading Between Banks
European banks agreed to suspend trading in the $2.8 trillion market for mortgage debt known as covered bonds to halt a slump that has closed the region's main source of financing for home lenders.

The European Covered Bond Council, an industry group that represents securities firms and borrowers, recommended banks withdraw from trades for the first time in its three-year history until Nov. 26. Banks are still obliged to provide prices to investors, according to the statement today.


Banks including Barclays Capital, HSBC Holdings Plc and UniCredit SpA took the step as investors shun bank debt on concern lenders face more mortgage-related losses than the $50 billion disclosed. Abbey National Plc, the U.K. lender owned by Banco Santander SA, became the third financial company to cancel a sale of covered bonds in a week as investors demanded banks pay the highest interest premiums on covered bonds in five years.

``We are in a deteriorating situation,'' Patrick Amat, chairman of the Brussels-based ECBC and chief financial officer of mortgage lender Credit Immobilier de France, said in a telephone interview.

``A single sale can be like a hot potato. If repeated, this can lead to an unacceptable spread widening and you end up with an absurd situation.''

Sales Pulled
Covered bonds are securities backed by mortgages or loans to public sector institutions. The notes offer more protection to bondholders than asset-backed debt because the issuing bank is liable for repayments. They typically have the highest credit ratings.

``There's a crisis of confidence for everything but AAA government bonds,'' Arnd Stricker, a management board member at Corealcredit AG, the German commercial property lender owned by Lone Star Funds, said at a conference in Frankfurt. ``Covered bonds are being thrown in the same basket'' as mortgage securities, even though they are safer, he said.

> No wonder spreads for financials are at historic levels and libor is rocketing.......

> Kein Wunder das die Risikoaufschläge auf historischen Ständen sind und Libor ein extremes Maß an Skepsis signalisiert....

Abbey National in London said today it postponed its sale of covered bonds because of ``poor'' demand. AIB Mortgage Bank, a unit of Dublin-based Allied Irish Banks Plc, pulled a covered bond sale in euros yesterday and Ahorro y Titulizacion, an investment unit controlled by Spanish savings banks, decided against issuing the debt on Nov. 16.

Spreads Widen
``In light of the current market situation and in order to avoid undue over-acceleration in the widening of spreads,'' the committee of banks and borrowers ``recommends that inter-bank market making be suspended,'' the council said in an e-mailed press statement.

The extra yield, or spread, that investors demand to hold covered bonds sold by German banks instead of government debt has climbed to 38 basis points from 23 basis points six weeks ago, according to Merrill Lynch & Co. indexes. The premium is the widest in more than five years.

Some banks agreed to stop providing prices on covered bonds for half a day on Aug. 16 to stem losses from widening spreads, according to Johannes Rudolph, a covered bond analyst at HSBC in Dusseldorf. Today's suspension is the first from the industry association, ECBC's Amat said.

``Conditions have really weakened over recent days,'' said Andreas Denger, a covered bond analyst at Calyon SA in London. ``Most investors are not willing to invest in the current volatile market.''

Pfandbrief `Solidarity'
Trading in Germany's pfandbrief market was also suspended in a sign of ``solidarity,'' said Helga Bender, a spokeswoman for the German Pfandbrief Association VDP's German Market Maker and Issuer Committee. Pfandbrief bonds are a subset of covered bonds with stricter regulations.