Germany’s Pfandbriefe could be the ideal product for US investors but they remain hesitant, says Suzanne Miller.The German Pfandbriefe has been more reliable than a Duracell battery. First issued 230 years ago, the bonds have survived the Napoleonic wars, World War II and the collapse of the Berlin Wall with no known defaults, proponents say. Yet most US bond investors have scant interest in the Pfandbriefe, a covered bond collateralised by long-term assets that has traditionally been issued by German mortgage banks. Shouldn’t US investors reconsider, given that Pfandbriefe have toughed out one of the worst credit cycles since the Great Depression?
This was what senior German mortgage bankers and a handful of experts and traders were hoping when they met with US investors at a New York conference in May. The message was that the Pfandbriefe can survive just about anything – even Germany’s current banking crisis. “Don’t believe the German banking system sucks and the Pfandbriefe is part of it. The Jumbo market is the safest and most liquid you can find,” the US audience was advised by Christian Ganssmuller, head of German fixed income at Citigroup Global Markets Deutschland AG.
