Yield spreads between German covered bonds (Pfandbriefe) and German
government bonds usually have been interpreted as pure liquidity premia. In
contrast, our analysis reveals that liquidity is the most important, but not the
exclusive risk factor within the Pfandbrief market. We show that Pfandbrief yield
spreads also depend on the quality of the issuer, the type of collateral, and the
quality of the cover pool. In particular, it is surprising that the issuer's default
risk is priced considerably, even though Pfandbriefe are backed by high-quality
mortgages or public-sector loans and a Pfandbrief default has never been occurred.
Using recently published cover pool data, we also show that the quality of the cover
assets is less relevant in a normal market environment, but important in times of
financial turmoil. Hence, Pfandbrief issuers with a sustainable cover pool profit
from lower refinancing cost, especially during market crises.
Dieser Eintrag ist Teil der Universitätsbibliographie.
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