Since the loss of state backing two weeks ago, pricing for German pfandbriefe tied to landesbanks has tightened on the back of limited supply going forward (see ASR 7/25/05). Analysts at Dresdner Kleinwort Wasserstein said that three to five year landesbank jumbo pfandbriefe have come in by two to three basis points since the deadline passed.

While certain pfandbriefe were grandfathered in, non-guaranteed pfandbriefe were issued between July 19, 2001 and July 18, 2005 and mature after Dec. 31, 2015. "The rapid tightening demonstrates the performance potential generated when the supply pipeline is cut off," reported DrKW analysts. "In the past we have repeatedly stated our opinion that grandfathered landesbanks jumbo spreads could tighten midterm and that the potential for a set back was limited."

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