A4 für Copyshop GB.indd - Bayerische Landesbank

Bond market
Issuers on the Euro capital market enjoyed a good year, ending with a boom in the
fourth quarter, triggered by the weakness of the US dollar. The low interest rate
policy favoured by the central banks had promoted a general surge of liquidity.
Against the backdrop of a sometimes considerable scarcity of offers, this meant that
spreads narrowed to historical lows. While burgeoning budget deficits resulted in
unabated issuing activity from public-sector issuers, there was a 40 percent decrease in
new corporate issues in comparison with 2003. The offer of corporate bonds shrank
further due to diminished activity in the M&A sector, the existence of alternative
sources of funding and measures aimed at consolidating or improving corporate rat-
ing. Given the low nominal interest rate level, investors either looked to the BBB sector
for yield opportunities, held, or turned increasingly toward durations of up to 30 years
(corporates: 20 years). Corporate investors, on the other hand, exploited the capital
market situation in order to buy back outstanding high-coupon bonds.
BayernLB was lead manager for 40 customer issues in 2004. This allowed the Bank to
both preserve and gain market share in public-sector issues as well as in the area of
arranging and drawing under MTN and CP programmes. Considerable headway was
made in expanding the pfandbrief / covered bond product at a national and interna-
tional level. This included the issue and successful placement of the first covered bond
from a Hungarian issuer – placed in HUF and EUR – as well as the first Bavarian savings
bank pfandbrief (Stadtsparkasse München, with a volume of EUR 150 million),
for which BayernLB was lead manager.
Particularly worthy of note was EUROweek’s decision to award both first and second
place in the category “Best sub-sovereign municipal bond – 2003” to BayernLB-man-
aged issues: namely of a EUR 750 million 3 3 /4 percent treasury note by the Free State
of Bavaria and a EUR 1 billion 4 1 /4 percent bond by the Province of Quebec under
BayernLB’s lead management.
BayernLB’s lead management of a EUR 1 billion 4 1 /8 percent bond with a duration
from 2004 to 2009 for DaimlerChrysler represented another important milestone in
2004 in terms of corporate bond issues. This placement was also completed success-
fully.
Business with asset backed securities (ABS) continued to be highly satisfactory for
BayernLB in 2004. The Bank is currently sponsoring five asset backed commercial
paper programmes (ABCPs) in Europe and the USA, whose activities include the pur-
chase of receivables from customers. The programmes are funded on the capital mar-
ket. At year-end, the Special Purpose Entities had a total of around of EUR 11.6 billion
outstanding ABCPs.
As one of the instigators of the true sale initiative (TSI) and one of the founding mem-
bers of True Sale International GmbH, founded in May 2004, BayernLB, along with 12
other banks, contributes significantly to the expansion of the securitisation market in
Germany. The objective of the TSI is to create favourable conditions for true sale securi-
tisation transactions. These conditions are already in place in other European countries
BayernLB – our company
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} BayernLB places
first Hungarian-
issued covered
bond and first
Bavarian savings
bank pfandbrief
} As founding
member of TSI,
BayernLB develops
German securitisation
market