Jens Tolckmitt

The Association of German Pfandbrief Banks (vdp) is publishing spread data for all Jumbo Pfandbriefe with a residual maturity of more than two years on a daily basis from today (Monday) under an initiative to improve secondary market transparency.

Based on indicative spreads from 15 of the banks most active in Pfandbriefe, the vdp will publish by 1815 CET the average spreads of Jumbo Pfandbriefe versus six month Euribor. The vdp said that “a statistical procedure and a Quality Assurance Committee will ensure that the average spreads published reflect market conditions”. Available on the vdp’s website, the data will be published in tables and charts, and made available in Excel format.

“We offer investors and other interested parties, free of charge, a one-stop market overview,” said Jens Tolckmitt, vdp general manager. “Indicative average spreads of Jumbo Pfandbriefe have never before been presented so clearly.”

The vdp has been seeking ways to improve secondary market transparency and liquidity since the breakdown of its requirements for inter-dealer market-making after the onset of the financial crisis in 2007. The vdp said that in parallel with the transparency initiative it is amending the minimum standards governing Jumbo Pfandbriefe, which previously governed inter-dealer market-making.

“Investors can continue to rely on receiving bid and ask prices for Jumbo Pfandbriefe from the syndicate banks,” said the vdp. “The abolishment of the rigid bid-ask spreads is compensated by the market transparency that has now been created.”

Under the amended minimum standards, Jumbo Pfandbrief status can be achieved by increasing deals of less than Eu1bn until they reach Eu1bn, it added, provided other Jumbo requirements are met.

The vdp has previously introduced standardised reporting from Pfandbrief issuers and made this available on its website, and in December indicated that it would seek an amendment to the Pfandbrief Act to expand the information issuers need to disclose – something the ICMA Covered Bond Investor Council has been pushing for.

Tolckmitt said that German Pfandbriefe already lead the way in terms of the transparency of cover pools.

“With this platform, we are setting a further milestone in matters of transparency,” he said, adding that the vdp is accommodating a wish for greater price transparency that smaller institutional investors in particular have often expressed.