Arrears of foreign assets in cover pools backing German Pfandbriefe increased to 0.21% in the first quarter of 2014 while domestic assets continued to perform well, and the overall effect of the former will be limited as the share of foreign assets in German cover pools is decreasing, said Moody’s yesterday (Monday).

The rating agency said that arrears (90 days plus) of foreign assets in German cover pools had risen to 0.21% in the first quarter of 2014.

“The majority of assets in arrears are in the euro periphery, with arrears in Greek assets now representing 99.8% of total exposure,” said Moody’s.

However, it added that the spillover effect will be limited as the share of foreign assets in German cover pools is on the decline.

“Even if the trend of increasing arrears in foreign assets were to continue, the overall effect on the German Pfandbriefe market is expected to be limited,” said the rating agency. “On average, three quarters of assets backing German mortgage Pfandbriefe are domestic.”

Moody’s also noted that the share of foreign assets in German Pfandbrief pools has decreased by 2.4% over recent years, and that it expects this trend to continue.

However, it noted that there is a variation in the share of foreign assets between the different Pfandbrief programmes.

“This means that programmes with a lower share of domestic assets may have a higher exposure to assets in arrears than the average Pfandbriefe pool,” Moody’s added.

According to the rating agency, domestic assets have continued to perform well, with arrears dropping to below 0.10% in the first quarter of 2014.

Total arrears in cover pools backing German mortgage Pfandbriefe stood at 0.12% in the first quarter, according to Moody’s, having varied between 0.10% and 0.14% over the past five years.