Chart Of The Day - " 90 Day Delinquency Rates In Spanish RMBS"

One or two more quarters and the 2008 vintages are already catching up with 2005....Let´s hope the ECB with their € 60 billion QE in covered bond purchases ( Update : ECB Said to Have Debated 125 Billion-Euro Asset Package in May ) isn´t getting as reckless as the Fed ( for their latest latest stunt see Fed Bends Over Backward For CMSA, Will Feed Inflation Capacitor With More Toxic Garbage via Zero Hedge ) or the spanish central bank with their brilliant move in selling gold to buy spanish mortgages ( see here).....

Noch ein oder zwei Quartale und die 2008er Daten der "überfälligen" Hypothekenzahlungen werden bereits die für das Jahr 2005 locker hinter sich gelassen haben.....Bleibt zu hoffen das die EZB mit Ihrem QE Versuch ( Kauf von € 60 Mrd Covered Bonds / Pfandbriefen UPDATE: ECB Said to Have Debated 125 Billion-Euro Asset Package in May ) zumindest nicht ganz so unverfroren und unverantwortlich agiert wie es die Fed ja momentan im Wochenryhthmus praktiziert ( siehe gestriges Beispiel Fed Bends Over Backward For CMSA, Will Feed Inflation Capacitor With More Toxic Garbage via Zero Hedge ). Wie bereits vorher berichtet ( siehe hier ) übertrumpft die spanische Zentralbank mit der Entscheidung Ihre Goldreserven zu vertickern und dafür in spanische Hypotheken zu investieren aber selbst Bernanke. Und das ist wirklich ne reife Leistung........ Geradezu Oscarverdächtig......



Hat tip FT Alphaville

With unemployment running close to 20 percent i think it is a safe bet that we are just starting to see the pain ( despite the relief from lower interest payments, almost 100 percent of mortgages have variable rates ( see European Mortgage Market / Percentage Of Variables Rates ) and the Spanish borrower is benefitting heavily from the 1% EZB rate ) But i doubt that this will lead to a much different outcome than in the US ( see A Delinquent Spike / Chart US Delinquencies ) .......

Dank einer Arbeitlslosenquote von knapp 20% dürfte hier demnächst eine Explosion an faulen Krediten fast garantiert sein ( und das trotz der massiven Entlastung durch die sinkenden Zinsbelastungen, im Gegensatz zu Deutschland werden fast 100% der Hypotheken variabel verzinst ( siehe European Mortgage Market / Percentage Of Variables Rates ). Es gibt europaweit wohl kaum eine Kreditnehmergruppe die mehr vom momentanen 1% Leitzins der EZB profitiert , ich denke das selbst dieser Fakt ein ähnliche Entwickluung wie in den USA ( unbedingt den Chart angucken A Delinquent Spike / Chart US Delinquencies ) bestenfalls verlangsamen kann......

UPDATE: Scrutiny of Spain’s potential banking pain increases & Spanish banking pain, Caja Madrid RMBS edition

Caja Madrid - Spain’s second-largest savings bank - said it would skip EUR1.12m in interest payments on residential mortgage-backed securities due to soaring defaults on the underlying home loans.

Caja Madrid issued its RMBS II bonds in 2006....

When defaults reach 18.3 percent, all investors except for those in the highest-ranked notes will be cut off, according to Standard & Poor’s. About 16 percent of the underlying mortgages are now either in arrears by more than 90 days or have already defaulted, S&P data show.

Caja Madrid has sold 9.2 billion euros of mortgage-backed bonds since 2006 in four transactions, according to data compiled by Bloomberg. The lender packaged home loans it made to borrowers at the peak of Spain’s 14-year real-estate boom

Spain Bubble Watch

For a decade, the Spanish housing sector enjoyed uninterrupted growth, as low interest rates encouraged borrowing. Average house prices have nearly quadrupled during the past 10 years. About 750,000 homes were built in Spain in 2006 -- more than in France, Germany and the U.K. combined.

Hypo Real Estate And The Art Of Reading The Latest Interim Report.....

I´m a little bit late on this story but this is indeed one more example of how incompetent the German "elite" is in dealing with the financial crises .....One week after one of the biggest bailouts in history with close to € 35 billion (it was still unclear how big the part from the German banking and finance sector and the taxpayer shoud habe been, rumors were running that the guarantee from the "private" sector was € 8 billion and the rest was provided via the German taxpayer ) and calming words that this should be well enough for the "foreseeable" future it looks like at least one bank ( Deutsche Bank ) that was involved in providing one part of the guarantee had finally gotten the time to read the latest report........ Very difficult for the German elite ( banking, oversight, Bundesbank, politicians etc ) to see at first glance that the proposed number would carry the HRE only over the next 3 month..... If you want to laugh out loud i highly recommend to read the "risk report" on page 24 in the latest HRE Interim Report at June 30, 2008.... Looks like we will get the "mother of all German bailouts" before the asian markets will be open for trading......

Ich habe aufgrund der überaus hektischen letzten Börsenwoche leider keine Zeit gehabt das Thema HRE zu beackern. Ich verweise daher dringend auf den Blogger "Weissgarnix" der bereits als die erste Meldung über den Bailout über die Ticker lief die heutigen Ereignisse vorhergesagt hat. Genießt bitte in der Reihenfolge seine Berichterstattung zu dem HRE Debakel
1. HRE - Da kömmt noch (viel) mehr!
2. Lesestoff für klagefreudige HRE-Aktionäre
3. Avanti Dilettanti!

Wer zudem noch gute Science Fiktion lesen möchte dem empfehle ich anstelle Perry Rhodan den letzten HRE Zwichenbericht zum 30.06.2008... Mehr an der Wirklichkeit vorbei geht nun wirklich nicht...... Tippe mal das wir noch bevor die Asiatischen Börsen den Handel eröffnen die "Mutter aller Deutschen Bailouts" sehen werden ......

It is a irony and a farce that 2 ( HRE & the merged Depfa ) of the biggest supporters & cheerleaders of the "Pfandbrief" ( covererd bond ) with the supposed highest safety standarts are running into funding problems..... But it looks like they have choosen to get a little bit of extra yield in ramping up their repo funding a whopping 41% since the end of 2007 to € 89 billion ( see Page 27 HRE Analyst Presentation ) while their long term covered funding is flat since the end of 2006.....

Quote CFO at this presentation " We take advantage of the very favourable conditions of the repo market....."

But what else do you expect from a management that had this to say back in January Hypo Real Estate Crashing 35%...CEO "We Did A Fantastic Job"......

Zudem möchte ich noch darauf hinweisen das es einer gewissen Ironie und Tragik gleichkommt, das ausgerechnet zwei ( HRE plus übernommene Depfa ) der größten und strärksten Befürworter im Pfandbriefmarkt der ja bekanntermasen eines der sichersten Anlageinstrumente unsere Zeit ist, in Refinanzierungsprobleme gelaufen sind. Normalerweise dürften sich die Pfandbriefe gerade in dieser Zeit ungebremster Nachfrage erfreuen. Dummerweise sieht es für mich so aus als wenn das vollkommen inkompetente Management der HRE/Depfa wohl wegen eines minimalen Zinsvorteiles die Ausweitung des Geschäftes einzig und allein mit der Refinanzierung durch Repos ( 44% seit Ende 2007 auf sagenhafte 89 Mrd € ) zu stemmen versucht ( siehe Seite 27 HRE Analysten Präsentation ) während die langfristige Finanzierung durch Pfandbriefe / Covered Bonds seit Ende 2006 unverändert geblieben ist.

Zitat aus der dazugehörigen Telefonkonferenz "Wir haben die sehr vorteilhaften Bedingungen des Repomarktes ausgenutzt........"

Aber was sonst soll man auch von einem Management erwraten das im Januar dieses Zitat rausgehauen hat Hypo Real Estate Crashing 35%...CEO "We Did A Fantastic Job"......

Hypo Real Estate Rescue at Risk as Banks Withdraw Their Support Bloomberg
Hypo Real Estate Holding AG, the ailing German property lender, said a 35 billion-euro ($49 billion) government-backed bailout plan collapsed as commercial banks withdrew their support.

``The bank is in a very difficult situation,'' Hypo Real Estate spokesman Hans Obermeier said in a telephone interview. ``We hope everyone involved in the discussions is aware of this.''

German authorities brokered the Sept. 28 bailout to avoid economic damage that would have resulted from the failure of the nation's second-biggest property lender. Hypo Real Estate said in a statement late yesterday that ``alternative measures are being investigated.''

Hypo Real Estate's financing needs exceeded the bailout plan guarantee, Germany's Die Welt reported yesterday, citing unnamed people in the finance industry. It will need 20 billion euros by the end of next week and 50 billion euros by the end of the year, according to the newspaper. As much as 100 billion euros may be needed to shore up the bank's finances by the end of 2009, Die Welt said. Obermeier declined to comment.

The European Central Bank and the Bundesbank planned to contribute jointly 20 billion euros, and a group of unidentified banks another 15 billion euros. The plan called for Hypo Real Estate to use 42 billion euros in assets, mostly debt owed by government borrowers, as collateral.

Heiner Herkenhoff, a spokesman for the German BDB banking association, declined via e-mail to comment. Bundesbank spokesman Christian Burckhardt and the German Finance Ministry didn't return calls seeking comment.

Shut Out
The bank sought the lifeline after its Dublin-based Depfa Bank Plc unit, which specializes in government lending and depends on now-closed money markets for funding, failed to get short-term funding amid the credit crunch.

Failure to provide the rescue package ``may have triggered unpredictable consequences for the German financial and economic system similar to those of the collapse of U.S. financial group Lehman Brothers,'' Frankfurt-based Bundesbank and BaFin, Germany's financial regulator, said in a joint letter dated Sept. 29 and addressed to Finance Minister Peer Steinbrueck.

``If we had not acted, the bank's crisis wouldn't have just hurt the financial sector, but its network of business would have hurt the real economy, in Germany and beyond,'' German Finance Minister Peer Steinbrueck said the same day.

Hypo Real Estate, run by Chief Executive Officer Georg Funke since it was spun off from HVB Group in 2003, reported writedowns on collateralized debt obligations on Jan. 15. The company said Aug. 13 that second-quarter pretax profit plunged 95 percent because of further markdowns on debt.

Flowers Investment
A group led by J.C. Flowers & Co., the buyout firm run by Christopher Flowers, bought a 24 percent stake in Hypo Real Estate for about 1.13 billion euros in June.

Former parent HVB Group is now a unit of UniCredit SpA, Italy's biggest lender, which is holding an extraordinary board meeting today to boost its regulatory capital and settle investors' concern with its finances.

The global financial crisis that prompted Lehman Brothers Holding Inc.'s Sept. 15 bankruptcy filing is weighing on Europe. Belgian authorities are exploring ``all methods'' to keep Fortis in business even after it received an 11.2 billion-euro government bailout on Sept. 28. Belgium and France on Sept. 30 threw Dexia SA a 6.4 billion-euro lifeline.

Banks "Dog days of winter" / Economist

Nice summary what just happend the past few days and that so far and a reminder that all the central bank action didn´t change anything.....

Nette Zusammenfassung von allem was alleine in der letzten Woche passiert ist und eine Erinnerung das sich trotz aller Zentralbankaktionen nicht wirklich viel geändert hat.

Dog days of winter / Economist
Banks are gripped by worries about liquidity. How long will they go on?
WRITE-DOWNS of $45 billion, and billions more to come. A collapse in share prices that has destroyed even more value. The blood of two Wall Street chieftains and many more underlings on the carpet. The fallout from the credit crunch has been so intense that some feel a pain barrier may have been breached. On November 27th and 28th the S&P 500 posted its first consecutive daily gains since October, partly on hopes of a cut in American interest rates and on some rare good news about Citigroup. Abu Dhabi Investment Authority paid $7.5 billion for a 4.9% stake, boosting the bank’s faltering capital ratio. Fire Sale At Citigroup...Citigroup to Get $7.5 Billion Infusion From Abu Dhabi But four months after they first seized up, the credit markets remain in a state of paralysis. The banks still have a long, hard slog ahead.

Short-term interbank rates at which banks lend to each other, and which are a good gauge of concern, have risen steadily since mid-November. On Wednesday November 28th the two-month London Interbank-Offered Rate hit its highest level in euros since May 2001. Rates in euros and dollars tower obdurately above central-bank targets, despite announcements from both the European Central Bank and America’s Federal Reserve that they will inject extra funds into the money markets

As in the summer, banks are hoarding cash because there is still great uncertainty about their own and counterparties’ exposure to losses and off-balance-sheet vehicles. Groups of banks that know each other well, such as the Spanish and Scandinavian banks, are rumoured to have agreed on informal lending arrangements. Elsewhere, caution prevails: what interbank lending there is tends to happen in the afternoon, after all the bad news has had time to come out.

There’s still plenty of that to go round. Kreditanstalt für Wiederaufbau, a state-owned German bank, announced on November 27th that it was setting aside another 2.3 billion ($3.4 billion) to cover subprime-related losses at IKB, a Dusseldorf-based bank in which it has a large stake. German IKB Bailout Now Over $ 7 billion & More trouble ahead for German Landesbanken. On the same day, Wells Fargo, an American bank that had been looking pristine in comparison with its peers, revealed that it would take a $1.4 billion charge on its home-equity loans.

Nerves have frayed in even the sleepiest corners. Europe’s covered-bond specialists emerged blinking into the light after a spike in spreads (see chart) and the postponement of several new issues led to the temporary suspension of the market in late November. By most measures, covered bonds are the safest of bets. The assets that back them (either pools of mortgages or public-sector loans) are required to meet stringent quality standards. If things do go wrong, investors have recourse both to the assets that back them and to issuers’ balance sheets. Yet even these belts and braces did not reassure investors. Europe Suspends Mortgage Bond Trading Between Banks

> No conincident that UK and Spain are leading.....

> Sicher kein Zufall das gerade UK und Spanien die Liste anführen....

Liquidity problems are compounded by impending calendar and fiscal year-ends. Banks are keen to hold cash when markets are closed or trading is thin. Many are also cleaning up their books for accounting purposes. Some of the central-bank interventions are geared to getting banks over the year-end squeeze: the Fed has extended $8 billion in short-term loans until early 2008.

Year-end fretfulness has prompted some comparisons with the turn of the millennium, when fears of the “Y2K bug” also encouraged the stockpiling of cash. But the analogy ends there: although funding conditions should ease in January, few believe that the credit markets are going to spring back to normal. Valuation methodologies and disclosure standards on toxic investments still vary widely. The market value of subprime assets continues to move around. Question marks over the wider economy are intensifying—on November 28th Don Kohn, the Fed’s vice-chairman, sparked hopes of another interest-rate cut in December when he acknowledged the impact of “elevated turbulence” in financial markets on the availability of credit.

Off-balance-sheet assets are another source of worry. On November 26th HSBC, Europe’s biggest bank, announced that it would consolidate $45 billion-worth of assets held in two structured investment vehicles (SIVs) onto its balance sheet. That puts pressure on other banks with exposure to SIVs, troubled Citigroup chief among them, to follow suit. It also shows that HSBC does not believe funding conditions for SIVs will soon ease. HSBC Will Take on $45 Billion of Assets From Two SIVs

A prolonged period of tight liquidity is arguably more threatening to banks than one-off write-downs, particularly for those that rely on wholesale funding. Expect to see slower loan growth, more asset sales and a fight for deposits, as banks try to diversify their sources of funding. Vasco Moreno of Keefe, Bruyette & Woods, an investment bank, thinks it will take a year of banks reporting decent numbers before an end can be called to the credit crunch. Roll on 2009.

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.