Issuance conditions for Pfandbriefe are expected to remain positive, but ease from this year’s peaks, according to the Association of German Pfandbrief Bank’s latest half-yearly member survey, after the market proved resilient to geopolitical developments in the first half.

The survey’s overall score, reflecting conditions for both covered and unsecured bonds, is 11, down from 17 in December, but still the second highest since the survey was launched in December 2022. Pfandbriefe’s score of seven has halved from the last survey, but is only the second positive score recorded, while for unsecured, the score fell from 22 to 16.

In the Issuance Climate survey, vdp members assess a variety of drivers in the capital markets environment and their impact on issuance plans over the past six months, today and in the coming six months, and assign these a score from minus 100 to plus 100. These factors are then weighted and combined into an aggregate score for Pfandbriefe, unsecured bonds and overall issuance. Thirty-four issuers contributed to the latest edition.

“The vdp Issuance Climate survey reflects the currently upbeat mood among capital markets experts,” said Steffen Stachna, senior manager, capital markets, at the vdp (pictured). “Regarding the coming six months, the outlook is slightly subdued, but all in all, still positive.”

Sources for charts: vdp, Börsen-Zeitung; Graphic: www.igrafik.de

Contributing to the current high score of 71 for investor demand for Pfandbriefe – only slightly down from 78 in December and well above the score of 22 expected at that time for the first half of the year – is a score of 37 for oversubscription levels at present (46 in December). This has come at the same time that Pfandbrief issuance, at some €35bn, has matched last year’s volumes.

“That’s in spite of the geopolitical developments we’ve seen this year, particularly in the Middle East, which led to fewer issuances in March and April,” said Stachna. “Indeed, we saw sufficient demand to comfortably absorb a large portion of the funding requirements foreseen for the whole year – even in longer maturities.

“We expect the second half of the year to be quieter, as is traditional,” he added. “We could expect that to have a stabilising effect on spreads, which have actually been quite stable for the year.”

Investor demand is expected to moderate over the next six months, with a score of six for Pfandbriefe. Oversubscription levels are seen remaining buoyant, but spreads against swaps and particularly Bunds are expected to weigh on demand levels.

The interest rate trend is a strong plus across secured and unsecured products, at 59, and much higher than the score of five recorded in December. The vdp also asked respondents their views on the direction of yields and just over 60% expect the 10 year Bund yield to rise slightly from around 3.0% currently to between 3.0% and 3.2% by year-end, with yields having already risen some 20bp this year – something not widely forecast at the start of this year.

In the first five months, new Pfandbriefe totalling €32.2bn were issued, up 2% versus 2025, with mortgage Pfandbriefe contributing €23.8bn (up 6%) and public Pfandbriefe €8.4bn (down 8%). Benchmark Pfandbriefe of €20bn were issued up to the end of May – accounting for around one-fifth of overall benchmark covered bond issuance.

According to Stachna, some €25bn of Pfandbrief issuance is expected in the second half of the year, more than half of it in benchmark format, with benchmark Pfandbrief issuance for 2026 therefore ending at around €35bn.