Covered Bond & SSA View20 April 2016 Please see important disclosure on the last pages. 2 DK Agenda Page Market overview 2 IPT, Bid-to-Cover and NIP 5 The Canadian covered bond market

Please see important disclosure on the last pages.

2

Agenda Page

Market overview 2

IPT, Bid-to-Cover and NIP 5

The Canadian covered bond market – an overview 10

Purchases of regional bonds gaining momentum ahead of the ECB meeting 16

ECB tracker 18

Charts & Graphs 23

Publication overview 29

Contacts 30

Find us on Bloomberg: NRDR <GO>

Issue volume – Covereds Issue volume – SSA

0

5

10

15

20

25

30

05

/15

06

/15

07

/15

08

/15

09

/15

10

/15

11

/15

12

/15

01

/16

02

/16

03

/16

04

/16

EU

Rbn

AUBECACHCYCZDEDKESFIFRGBGRHUIEITLUNLNONZPTSESGUS

0

5

10

15

20

25

30

35

05

/15

06

/15

07

/15

08

/15

09

/15

10

/15

11

/15

12

/15

01

/16

02

/16

03

/16

04

/16

EU

Rb

n

Other

ES

AT

NL

FR

GE

SNAT

Source: Bloomberg, NORD/LB Fixed Income Research Source: Bloomberg, NORD/LB Fixed Income Research

Fixed Income Research

Covered Bond & SSA View 20 April 2016 15/2016

bbg://screens/NRDR

Covered Bond & SSA View 20 April 2016

NORD/LB Fixed Income Research

Page 2 of 34

Covered Bonds Market overview

Analyst:

Matthias Melms, CIIA, CCrA

pbb with longest Pfandbrief

benchmark

In the past few days, business on the primary market has waned significantly

compared with the previous week. Only three issues were recorded,

although the transactions fromm pbb and Leeds Building Society had some

unique features: pbb issued a Pfandbrief with a volume of EUR 500m and a

maturity of 19 years. According to our data, this has the longest term ever

issued for a Pfandbrief benchmark. Outside Germany only Caffil (CAFFIL 1

1/4 01/22/35) and CFF (CFF 3 7/8 04/25/55) from France and Banca

Santander (SANTAN 2 11/27/34) and Bankia (BKIASM 4 1/8 03/24/36) from

Spain currently have covered bonds with comparable (or longer) terms.

While PBBGR 1 1/4 04/20/35 was issued with a reoffer spread of ms +25bp

and performed fairly well on the secondary market, only the CAFFIL 1 1/4

01/22/35 is trading at a comparable level of ms +23bp. The other three

covered bonds have significantly higher levels of up to ms +123bp (BKIASM

4 1/8 03/24/36). Leeds Building Society, in contrast, issued an inaugural

EUR-denominated benchmark covered bond. The issue with a term of four

years was launched with a reoffer spread of ms +27bp and therefore offered

a new issue premium of 10bp on the UK covered bond curve. The fact that

the reoffer level was extremely attractive illustrates on the one hand the bid-

to-cover ratio of 2.6, which indicates a high level of interest on the part of

investors, and, on the other hand, the performance on the secondary

market, where the bond has now tightened by 4bp.

Banca Popolare Emilia Issuer Country Timing ISIN Maturity Volume Spread Rating

Leeds GB 14.04.16 XS1398337086 4.0y € 0.5bn ms +27bp AAA / Aaa / -

pbb DE 13.04.16 DE000A13SWG1 19.0y € 0.5bn ms +25bp - / Aa1 / -

Eika Boligkreditt NO 13.04.16 XS1397054245 7.0y € 0.5bn ms +24bp - / Aa1 / -

Source: Bloomberg, NORD/LB Fixed Income Research (ratings: Fitch, Moody’s and S&P)

Düsseldorfer Hyp Last week the rating agency Fitch discontinued the senior unsecured rating

of Düsseldorfer Hypothekenbank after the issuer had terminated the rating

process with Fitch. This means that, at present, no rating from a rating

agency is available for either Pfandbriefe or seniors. This will also affect the

regulatory treatment. While the senior rating was previously used as a basis

for determining the risk weight due to the lack of Pfandbrief rating and equity

of 20% (CRR 120 (1), CRR 129 (5)) had to be applied given the BBB- rating,

the country rating is now used as a yardstick (CRR 121 (1), CRR 129 (5)).

Based on Germany’s AAA/Aaa rating, the capital requirement will be 10%.

Trader’s Comment Trading was lively in recent days, with activity dominated by a marked

buying propensity on the part of investors. While bonds from Scandinavia

were in very strong demand, Pfandbriefe with medium and long terms of up

to ten years were also sought after. After the widening of the last weeks,

buyers can be found once again for British covered bonds. Real money

investors were particularly requesting papers with medium maturities.



Page 3 of 34

SSA Market overview

Analysts:

Mario Gruppe, CIIA

Norman Rudschuck, CIIA

ECB purchases EFSF

portfolios of Greek banks

In the past week, the news that the ECB will in future purchase EFSF bonds

owned by Greek banks within the scope of its buying programme caused a

stir. Greek banks were provided with EFSF bonds in the course of the

various recapitalisation processes. Until now, these papers have been

excluded from the purchase programme. The decision, now confirmed by an

ECB spokesman, will give Greek institutions the opportunity to convert these

assets into “genuine” liquidity. According to concurring press reports, Greek

institutions hold bonds with a value equivalent to roughly EUR 37bn. The

central bank’s decision will not change the distribution of the buying volumes

between the individual asset classes, as the ECB will continue to use 10% of

its PSPP purchases for supras. Nevertheless, there is likely to be a stronger

weighting of EFSF bonds within the supra segment, which may affect the

relative attractiveness of issuers in this category. So far, the ECB has

purchased 30 different EFSF bonds. Only the EIB has to date purchased a

broader range of bonds (currently 47). In addition, the Eurosystem has

purchased ESM bonds (currently 11), as has the EU (currently 19). All other

issuers merely play a minor role in this respect. The greater focus on EFSF

papers that can now be expected should be accompanied by moderate

spread narrowing, which will probably not apply to the other issuers

mentioned here.

ECB Council meeting likely

to provide few surprises

Members of the ECB’s Governing Council will meet on Thursday for their

next scheduled meeting on interest rates. After a whole raft of decisions

were taken at the last meeting, this one is likely to end without any new

decisions. With the resolution to also purchase corporate bonds from the

end of Q2 and launch several long-term refinancing operations (TLTRO II),

central bankers already took decisions in March that will only be

implemented gradually. In light of this, there is no need to ramp up the

monetary policy at present.

IFAD and EIB

jointly call for

agricultural development

The EIB and the International Fund for Agricultural Development (IFAD)

recently signed an agreement designed to deepen and extend cooperation

between the two organisations. The aim is to create greater prosperity for

vulnerable and disadvantaged people in rural areas of developing countries.

Primarily agricultural industry is to be developed and jobs and prosperity

created in countries where the two organisations operate. In the context of

the recent international agreements, such as the accord on UN targets for

sustainable development and the Paris climate change agreement, the

partnership is to concentrate on investments in the agricultural sector that

will bring about sustainable and inclusive economic growth and secure food

supplies for a growing population in the future.



Page 4 of 34

Primary market There has been renewed activity on the primary market over the last few

trading days. IFB Hamburg, one of the smaller German development banks

made an appearance on the capital market. The IFBHH raised EUR 250m

via a ten-year bond ms +5bp. It benefits from the explicit guarantee of the

Free and Hanseatic City of Hamburg, which has a rating from Fitch of AAA.

Hamburg itself is also currently planning to issue a bond in benchmark

format. The 10y paper is expected to be placed at around ms flat. KfW,

Germany’s largest development bank, was also active on the primary

market. It topped up its DE000A11QTD2 by EUR 1bn at ms -17bp. The

public sector was also present on the market. For example, the City of Mainz

is planning to issue a seven-year floater. Lower Saxony raised EUR 375m at

ms -7bp via TAP. Eurofima, a financier of railroad rolling stock, raised EUR

600m. The bond which runs until 2023, was issued at ms +8bp and is the

first capital market appearance by the multilateral development bank this

year. Given the maturity structure of Eurofima, we assume that at least one

more EUR issue in benchmark format can be expected this year. Issues in

USD appear to enjoy continuing popularity amongst issuers, as the L-Bank

transaction illustrates, which issued a two-year bond at ms +22bp, raising

USD 2bn.

Issuer Country Timing ISIN Maturity Volume Spread Rating

EUROF SNAT 18.04.2016 XS1400224546 7.0 y € 0.6 bn ms +8bp - / Aa1e / -

ESM SNAT 12.04.2016 EU000A1U9951 8.0 y € 3.0 bn ms -14bp - / - / -

KBN Other 13.04.2016 XS1397023448 10.0 y € 1.0 bn ms +9bp - / Aaa / AAA

NRW GE 12.04.2016 DE000NRW0JH2 10.0 y € 1.25 bn ms flat - / Aa1e / AA-

Source: Bloomberg, NORD/LB Fixed Income Research (Rating: Fitch / Moody’s / S&P)

Trader’s Comment After EUR 1bn of NRW 04/26 was announced on the primary market at area

ms +3bp, EUR 1.25bn of the bond were issued at ms flat. Consequently it

was a very successful issue. Within the scope of the buying programme

country bonds with terms of six to ten years were purchased. Across the

maturity spectrum we continued to record slight spread narrowing in the

country segment. In the Canadian regions category there was demand from

the market with the result that spreads narrowed here too.



Page 5 of 34

Covered Bonds IPT, Bid-to-Cover and NIP

Analyst:


IPT different to reoffer spread

Initial estimates of price ranges used by consortium banks to sound out

potential investors are frequently the focus of discussions between issuers,

investors and syndicate banks. These estimates are referred to as IPTs

(initial price thoughts). The final reoffer spread and therefore the price of the

transaction is only fixed in the course of the book building process. It is not

uncommon for original estimates that investors have expressed an interest in

to differ more or less profoundly from the final spread due to the

development of demand. It is precisely these differences that repeatedly

cause resentment amongst investors, as they come at the expense of the

rate of return. Is it really the case that prospective investors are initially

offered an extremely attractive spread which is then scaled down quite

drastically in the book building process (subject to there being sufficient

demand)? To investigate this, we analysed the new issues on the EUR

benchmark covered bond market for the current year and compared the

respective IPTs with the final reoffer spreads. It becomes apparent that there

actually is a difference between the IPT and reoffer spread. The difference

this year was between 0 and 15 basis points, although we should bear in

mind that the IPTs are normally specified in a range, and so in this case we

used a value in the middle of the respective range as a reference.

Issuance spread as a

compromise of different

interests

In our opinion, definition of a fair issuance spread essentially reflects the

conflicts of interest of the parties involved, in that the issuer wants to

refinance on as favourable terms as possible, yet at the same time wants to

generate sufficient demand amongst investors and build up long-term

relationships through attractive offers with a view to further issues.

Investors, in contrast, want to achieve the highest possible return on their

investment and obtain a spread with potential for further price gains. The

leading consortium wishes to provide a successful transaction that can

distinguish itself through, for example, a high bid-to-cover ratio as well as a

good secondary market performance. Consequently, there is an incentive

here to initially select higher IPTs. A further point is the perception of the

market players. If, for example, IPTs of 10 – 12bp are issued and the reoffer

spread is fixed at 12 bp, many people regard this as not a very good result.

If, however, the same issue went to market at 12 – 14bp, many people

would say this was a success. The yardstick for the success of an issue is

therefore the question of whether the reoffer spread during the issue is

lower than the upper point of the range of the evoked IPT.

Bid-to-cover as indicator of

investor interest

This naturally correlates directly with the interest of investors in the issue.

As an indicator of interest we use the bid-to-cover ratio; this parameter

expresses the ratio between the order book and the issued volume. The

bid-to-cover ratio over all 728 euro-denominated issues from 3 January

2011 to the present ranges from 1.0 to 6.5, with an average value of 1.87.

The ratios in markets with good to very good covered bond ratings and

therefore lower reoffer spreads tend to be lower than in markets with weaker

ratings and higher reoffer spreads. The bid-to-cover ratios also fluctuate

depending on the market phase, which reflects the variation in the mean

value in recent years, ranging from 1.51 (2011) to 2.13 (2013).



Page 6 of 34

Bid-to-cover ratio by region and year Bid-to-cover ratio and tightening

0.0

0.5

1.0

1.5

2.0

2.5

3.0

CoreEurozone

PeripheryEurozone

Other Europe Overseas Median

Bid

-to

-Co

ver-

Rati

o

2011 2012 2013 2014 2015 2016

0

1

2

3

4

5

6

7

8

1.0 -1.25

1.25 -1.50

1.5 -1.75

1.75 -2.0

2.0 -2.25

2.25 -2.5

2.5 -2.75

2.75 -3.0

> 3

Tig

hte

nin

g IP

T -

Reo

ffer

in b

p

Bid-to Cover-Ratio

Source: market data, NORD/LB Fixed Income Research Source: market data, NORD/LB Fixed Income Research

Bid-to-cover ratio affects the

amount of spread tightening

To ascertain whether client interest in an issue affects the difference

between the IPT (in this case IPT mid) and the reoffer spread, we have split

the bid-to-cover ratios into bands from 1.0 to 3.0 at 0.25 intervals and

combined all ratios over 3. The simple correlation is the greater client

interest in a transaction, the higher the bid-to-cover ratio. Therefore, there is

apparently a connection between the bid-to-cover ratio and the spread

difference between the IPT (mid) and the reoffer spread. The lower the bid-

to-cover ratio, the less the spread narrows during the issuance phase.

Conversely, the narrowing potential for issues attracting a large amount of

client interest (measured by the bid-to-cover ratio) appears to go hand in

hand with a much higher narrowing potential between the IPT (mid) and the

reoffer spread. The reasons for this appear to be obvious, namely IPTs

which are much higher than the secondary market level appear attractive to

investors, which results in high demand measured by the bid-to-cover ratio.

High demand in turn allows for high narrowing potential during the book

building process.



Page 7 of 34

NIP (mostly) available In our view, a further indicator of the attractiveness of an issue is the new

issue premium (NIP) offered by a new issue, i.e. the difference between the

reoffer spread and the level on the secondary market. To determine the

NIP, we formed a logarithmic curve for the relevant issuers of a respective

issuer based on the outstanding issues and selected the potential

secondary market spread on this curve. Knowing full well the susceptibility

to error of this approach, such as the use of mid-swap spreads, we wanted

to get an indication of whether NIPs are provided. An analysis of all 190 new

issues brought to market since June 2015 showed that all bonds were

issued at least at the level of the secondary market and that no covered

bonds were brought to market below the secondary market curve. The NIP

ranged from 0 to 28bp, with a tendency for the NIP to be higher if the issuer

rating is weaker. On average we observed per quarter and country a

minimum NIP of 1bp (France, Q2/2015) and a maximum NIP of 14.9bp

(Italy, Q4/2015). The mean NIP was 6.8bp, although there was a difference

according to the region. For issues from the periphery the average NIP was

10.8bp, while for issues from other regions an NIP (median) of between 5

and 6bp (Core Eurozone: 5.9bp, Other Europe: 5.9bp, Overseas: 5.3bp)

was posted.

Conclusion Pricing on the primary market is influenced by all manner of factors, but the

ultimate success of an issue must be judged according to more

differentiated considerations. Issuers want to issue at as narrow a spread as

possible, while the long-term relationship with investors always has to be

taken into consideration. In turn, investors are interested in obtaining as

high a rate of return as possible. In between them are the syndicate banks,

whose prime objective is to ensure that the transaction is fully placed

(excluding joint lead interest). Parties, issuers and investors, must all be

satisfied. To navigate these tensions, IPTs have to be determined at the

start of the transaction, while the final reoffer spreads have to be fixed in

such a way as to take account of the interests of all the parties involved.

The good news for investors is that for the present at least a premium can

be expected for primary market transactions via the secondary market, but

expectations for issues rated as extremely attractive based on the IPT

should be tempered. Such transactions frequently induce such high demand

that the narrowing between IPT (mid) and the reoffer spread is higher than

the median value and so their attractiveness is lower than expected.



Page 8 of 34

Announce Date Security Description Bid-to-Cover Reoffer Spread IPTs Mid NIP

14/04/2016 LEED 0 1/8 04/21/20 2.6 27 30 10

13/04/2016 PBBGR 1 1/4 04/20/35 1.2 25 27 3

12/04/2016 EIKBOL 0 3/8 04/20/23 2.0 24 27 3

12/04/2016 BMO 0 1/8 04/19/21 1.4 14 18 4

11/04/2016 MUNHYP 0 1/2 04/22/26 1.4 -1 0 0

11/04/2016 DNBNO 0 1/4 04/18/23 1.5 16 19 5

06/04/2016 ABNANV 1 04/13/31 1.3 26 28 10

05/04/2016 ASBBNK 0 1/4 04/14/21 2.0 29 30 7

05/04/2016 CAFFIL 0 5/8 04/13/26 1.8 14 18 3

05/04/2016 LANSBK 0 1/4 04/12/23 2.8 15 20 4

04/04/2016 LLOYDS 0 1/2 04/11/23 1.3 28 30 6

23/03/2016 BPSOIM 0 3/4 04/04/23 2.8 52 60 2

22/03/2016 LANSNA 0 3/8 03/31/23 2.0 18 22 7

17/03/2016 WLBANK 0.2 03/24/23 1.6 -2 0 2

16/03/2016 ACACB 1 1/4 03/24/31 1.8 26 29 6

16/03/2016 ACACB 0 3/8 03/24/23 1.8 9 12 4

16/03/2016 AXASA 0 3/8 03/23/23 2.3 18 23 9

16/03/2016 BRF 0 1/4 04/01/21 2.6 20 22 10

15/03/2016 PLUSSB 0 1/4 03/22/21 2.0 22 25 8

14/03/2016 HESLAN 0 1/8 11/21/22 1.0 -3 -2 5

11/03/2016 ISPIM 0 5/8 03/23/23 3.2 45 60 3

08/03/2016 BBVASM 0 5/8 03/18/23 2.2 52 60 4

07/03/2016 CFF 0 1/4 03/16/22 1.9 15 18 5

07/03/2016 BHH 0 03/15/19 3.0 1 4 4

03/03/2016 BKIASM 1 03/14/23 2.4 82 90 6

03/03/2016 BNS 0 3/8 03/10/23 1.0 27 28 4

02/03/2016 CCBGBB 0 1/4 03/10/22 3.0 17 20 1

02/03/2016 SPABOL 0 3/8 03/09/23 1.3 23 25 12

02/03/2016 UOBSP 0 1/4 03/09/21 2.6 32 38 0

01/03/2016 DANBNK 0 1/8 03/09/21 1.7 16 20 6

01/03/2016 DB 0 1/4 03/08/24 1.5 2 5 5

29/02/2016 DAA 0.15 03/07/23 1.6 0 2 3

26/02/2016 RY 0 1/8 03/11/21 1.5 21 23 3

25/02/2016 NWIDE 0 1/8 01/25/21 1.6 21 25 6

25/02/2016 POPSM 1 03/03/22 1.9 88 90 23

24/02/2016 HASPA 0.1 03/02/22 1.6 0 2 3

24/02/2016 SVEGNO 0 1/8 03/02/21 2.4 18 20 3

23/02/2016 HVB 0 1/8 03/01/22 1.5 1 3 6

23/02/2016 KBC 0 3/8 09/01/22 2.8 19 23 4

22/02/2016 PBBGR 0.2 03/01/22 1.2 8 9 10

18/02/2016 MQGAU 0 3/8 03/03/21 2.0 40 42 11

18/02/2016 DGHYP 0 1/8 09/30/22 2.2 -2 1 4

17/02/2016 HSHN 0 1/8 02/24/21 1.2 18 18 20

Source: market data, NORD/LB Fixed Income Research



Page 9 of 34

Announce Date Security Description Bid-to-Cover Reoffer Spread IPTs Mid NIP

16/02/2016 HESLAN 0 11/23/20 1.5 -1 1 3

16/02/2016 BAWAG 0 3/8 02/23/22 1.6 27 30 10

15/02/2016 SHBASS 0 3/8 02/22/23 1.4 19 22 7

15/02/2016 DHY 0 1/4 02/22/23 1.4 1 3 6

15/02/2016 BHH 0 1/4 02/22/23 2.8 -1 2 7

12/02/2016 LBBW 0 1/8 02/21/22 3.0 -3 0 2

04/02/2016 LANTIR 0 1/2 02/11/21 1.1 44 45 20

04/02/2016 SEB 0.15 02/11/21 1.6 14 15 3

04/02/2016 CMCICB 0 3/8 09/12/22 1.6 14 15 6

03/02/2016 SWEDA 0.15 02/10/21 2.2 14 15 4

02/02/2016 BPCECB 0 3/8 02/10/23 2.4 17 20 9

01/02/2016 ABBEY 0 1/4 08/09/21 1.3 23 25 7

01/02/2016 CABKSM 1 02/08/23 1.6 78 83 11

28/01/2016 AIB 0 7/8 02/04/23 1.6 54 58 9

27/01/2016 CBAAU 1 5/8 02/10/31 1.4 50 51 9

27/01/2016 CBAAU 0 3/8 02/10/21 1.5 33 35 6

26/01/2016 WLBANK 0 3/4 02/02/26 1.1 1 1 2

26/01/2016 SBAB 0 1/4 01/20/21 1.4 17 18 7

22/01/2016 BNPPCB 0 1/4 09/02/21 2.0 6 8 6

21/01/2016 ACACB 0 1/8 08/28/20 1.3 10 10 7

19/01/2016 CFF 1 02/02/26 1.0 25 25 16

13/01/2016 SANTAN 1 1/2 01/25/26 1.3 65 65 11

13/01/2016 RFLBST 0 5/8 01/20/23 1.0 21 22 9

13/01/2016 DB 1 1/8 01/20/23 1.5 70 71 20

13/01/2016 BYLAN 0 3/4 01/20/26 1.5 -1 0 4

12/01/2016 BKIASM 0 7/8 01/21/21 1.2 65 65 15

12/01/2016 BNS 0.1 01/21/19 1.3 12 15 2

12/01/2016 PBBGR 0 1/2 01/19/23 1.1 8 8 18

11/01/2016 SOCSFH 0 1/2 01/20/23 1.3 7 8 7

11/01/2016 ERSTBK 0 5/8 01/19/23 1.9 16 18 7

11/01/2016 LLOYDS 0 3/8 01/18/21 1.5 17 18 4

08/01/2016 SRBANK 0 3/4 01/18/23 1.0 25 25 10

07/01/2016 LBPSFH 0 1/2 01/18/23 1.4 5 6 7

07/01/2016 ABNANV 0 7/8 01/14/26 1.1 11 12 10

07/01/2016 DNBNO 0 3/8 01/14/21 1.3 17 18 5

07/01/2016 BMO 0.1 01/14/19 1.5 12 15 2

05/01/2016 CAFFIL 0 1/2 04/13/22 1.0 7 7 3

05/01/2016 CAFFIL 1 1/2 01/13/31 1.0 25 25 5

05/01/2016 LBBW 0.05 01/13/20 1.9 -7 -6 3

05/01/2016 TD 0 3/8 01/12/21 2.0 20 22 5

Source: market data, NORD/LB Fixed Income Research



Page 10 of 34

Covered bonds The Canadian covered bond market – an overview

Analyst:

Kai Ebeling

Canadian issuers constitute

the third largest group of

issuers

With an issuance volume of EUR 7.75bn ytd (EUR-denominated benchmark

bonds) Canadian covered bond issuers currently constitute the third-largest

group of issuers behind France (EUR 14.75bn) and Germany (EUR 12.5bn).

Canada is the jurisdiction with the highest issuance volume of EUR-

denominated benchmarks outside the Eurozone. Despite the fact that its

covered bond legislation is relatively recent, Canadian covered bonds are

now a permanent fixture in the market. We start this article by providing an

overview of Canadian covered bond legislation before looking at the respec-

tive programmes briefly and finally examining developments on the primary

and secondary market in more depth.

A legal framework has been

in place since 2012

From 2007 up to and including 2012, Canadian issuers issued covered

bonds on the basis of a contractual framework. As a result of the amend-

ment of the National Housing Act (NHA) in June 2012, the Canada Mortgage

and Housing Corporation (CMHC) was asked to implement a legal frame-

work. CMHC implemented this request in December 2012 and simultane-

ously published the Canadian Registered Covered Bond Programmes Guide

(CMHC Guide), which defines the legal requirements for the respective issu-

ers and their programmes in detail. The NHA and the CMHC Guide have

provided the legal basis for Canadian covered bonds since then, meaning

that issues since 2013 come under the newly implemented law, whereas

covered bonds which were issued on a contractual basis and whose cover

pools contain loans guaranteed by the CMHC do not come under the Cana-

dian covered bond legislation and are assigned to a separate programme for

this reason.

Requirements for cover

assets

According to the requirements of the covered bond legislation, only first-

ranking mortgage loans used for residential purposes from Canada, which

are not insured against default by the debtor, are permitted as cover assets.

Furthermore, the properties financed may not contain more than four resi-

dential units and can have a maximum loan-to-value (LTV) of 80%. On top of

that, the loans that are being used as collateral must not be in default, at

least one interest or principal payment must have been made and the loan

agreements must not be the subject of any legal disputes or similar. In addi-

tion to the collateral defined above, the cover pool may also contain up to

10% substitute cover assets or cash.

Requirements for issuers Banks, trust companies, insurance companies or credit unions are among

the entities able to register as covered bond issuers in Canada. To register,

potential issuers must satisfy certain minimum requirements (according to

the CMHC Guide), whereupon, among other things, both the issuer and its

covered bond programme must have at least two ratings. Seven issuers are

currently authorised to use covered bonds for refinancing purposes in Cana-

da. However, to avoid asset encumbrance, the volume of outstanding bond

issues may not exceed four percent of total assets.



Page 11 of 34

A total of seven covered

bond issuers are currently

registered in Canada

The authorised issuers are Bank of Montreal (BMO), Bank of Nova Scotia

(BNS), La Caisse Centrale Desjardins (CCD), Canadian Imperial Bank of

Commerce (CIBC), National Bank of Canada (NBC), Royal Bank of Canada

(RBC) as well as Toronto Dominion Bank (TD), which all issue EUR-

denominated benchmark bonds as well. The following table lists various

distinguishing features of the associated covered bond programmes as well

as the issuer ratings. It is striking that all covered bond programmes have a

rating of AAA or Aaa and the collateral score, which is used by Moody’s to

estimate loan quality, is at a very good level, moving in a narrow range be-

tween 5.0% and 5.8%.

Banca Popolare Emilia A comparison of Canadian covered bond issuers (March 2016)

Banca Popolare Emilia Characteristics BMO BNS

1 CCD CIBC NBC

1 RBC TD

Issuer long term Rating (M//F/S&P/DBRS)

Aa3 / AA- / - / AA

Aa3 / AA- / A+ / AA

Aa2 / AA- / A+ / AA

Aa3 / AA- / A+ / AA

Aa3 / A+ / A / AA (low)

Aa3 / AA / - / AA

Aa1 / - / - / AA

Covered Bond Rating (M/F//S&P/DBRS)

Aaa / AAA / - / AAA

Aaa / AAA / - / AAA

Aaa / AAA / - / -

Aaa / AAA / - / -

Aaa / AAA / - / AAA

Aaa / AAA / - / AAA

Aaa / - / - / AAA

CB Programme Size USD 15bn USD 25bn EUR 5bn CAD 20bn USD 7bn EUR 32 bn CAD 40bn

Outstanding volume

CAD 10.3bn CAD 16.4bn CAD 4.4bn CAD 9.6 bn CAD 5.3bn CAD 38.0bn CAD 17.3bn

Cover pool volume

CAD 15.2bn CAD 20.4bn CAD 5.9bn CAD 17.7bn CAD 9.8bn CAD 49.5bn CAD 29.0bn

OC 47.6% 24.4% 34.1% 84.4% 84.9% 30.3% 67.6%

Outstanding volume under former Covered Bond Programmes

CAD 2.0bn CAD 6.4bn CAD 1.5bn CAD 1.4bn CAD 2.0bn - CAD 5.9bn

OSFI Maximum CAD 27.2bn CAD 36.9bn CAD 7.4bn CAD 19.1bn CAD 8.5bn CAD 44.7bn CAD 45.1bn

Free Issuance capacity CAD 14.9bn CAD 14.1bn CAD 1.5bn CAD 8.1bn CAD 1.2bn CAD 6.7bn CAD 21,9bn

Collateral Score

5.5%2

5.8%3

n/a 5.3%2

5,0%4

5.4%2

5,0%2

CRR risk weighting 20% 20% 20% 20% 50% 20% 20%

LCR level (benchmark)

2a 2a 2a 2a 2a 2a 2a

Source: Issuers, Moody’s, NORD/LB Fixed Income Research 1 February 2016,

2 January 2016,

3 October 2015,

4 December 2015

Banca Popolare Emilia



Page 12 of 34

Limit on covered bond

volume is currently not a

hindrance

The Canadian financial supervisory authority – Office of the Superintendent

of Financial Institutions (OSFI) – limits the issue of covered bonds to a max-

imum of four percent of the respective deposit-taking financial institution’s

total assets at the time of the issue. This is identified and shown in the cover

pool reports as “OSFI covered bond limit”. If the limit is breached, the issuer

must inform the OSFI without delay. If the excess is the result of a circum-

stance over which the issuer has no influence (such as an adverse move-

ment in exchange rates), no additional measures are required to reduce the

outstanding volume. Following the introduction of the leverage ratio, the

OSFI has adjusted the calculation of the OSFI covered bond limit, meaning

that since 2015, certain data fields in the leverage requirements return (LRR)

and Basel capital adequacy return (BCAR) templates have been used. In

their most recent cover pool reports, the seven Canadian issuers currently

have sufficient leeway for additional EUR-denominated benchmark issues.

On top of that, for instance, the last two outstanding issues issued by the

National Bank of Canada under the earlier structured covered bond pro-

gramme will mature in October this year, which will increase capacity for new

issues by ca. CAD 2.0bn. It should therefore be noted that the limit on cov-

ered bond issues does not restrict the activities of individual issuers at the

present time.

Risk weighting according

to CRR

Since the Canadian banks listed above are not domiciled in the EEA, their

outstanding covered bonds are neither UCITS 52 (4)- nor CRR-compliant,

meaning that investors can only use the standard approach for the risk

weighting. Accordingly, Canadian covered bond issues are to be treated as

unsecured bonds, which results in the risk weighting amounting – with one

exception based on the rating – to 20%. Any covered bond issues held from

the National Bank of Canada must even be backed with 50% equity because

of the rating by Fitch and Standard & Poor’s.

ECB eligibility and LCR

classification

If Canadian covered bonds were issued in EUR, GBP, JPY or USD, these

are eligible for repo transactions with the European Central Bank. Depend-

ing on the rating and characteristics of the respective covered bond, various

haircuts are applied. Furthermore, benchmark issues from the issuers listed

above which were issued under the legal framework must be classified as

level 2a assets in accordance with the provisions of the liquidity coverage

ratio if their reports continue to satisfy the requirements under CRR 129 (7).

Development of primary

market volume

The following chart shows the development of the primary market volume of

EUR-denominated benchmark covered bonds since the introduction of the

covered bond legislation in December 2012. The first issue under the new

legislation was issued by Royal Bank of Canada in July 2013. The other six

issuers (so far) then followed within a year.



Page 13 of 34

Primary market volume (EUR bmk) - development Issuance volume by issuer (EUR bmk)

5.5

12.5

14.25

7.75

4

11

12

6

0

2

4

6

8

10

12

14

0

2

4

6

8

10

12

14

16

2013 2014 2015 2016 ytd

nu

mb

er

in E

UR

bn

Issuance volume Benchmarks

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

BMO BNS CCDJ CM NACN RY TD

in E

UR

bn

2013 2014 2015 2016 ytd

Source: Market data, NORD/LB Fixed Income Research Source: Market data, NORD/LB Fixed Income Research

Continuous increase in

primary market volume

Since 2013, both the number of EUR-denominated benchmarks and the

issuance volume has grown continuously to reach EUR 40.0bn at present,

with six issues totalling EUR 7.75bn having been issued to date in the cur-

rent financial year. Average issuance volume in the individual calendar years

was between EUR 1.2bn (2014/15) and EUR 1.4bn (2013). Bank of Montreal

featured as the largest issuer in the jurisdiction (in terms of issuance volume)

both this year and last. We may therefore have to amend our forecast for the

Canadian covered bond market which was prepared at the end of 2015, of

EUR 10.0bn (at the end of 2016), during the year.

Benchmark issues by maturity Maturities by issuer

10% 9%

39%

64%

62%

53%

52%

36%28%

39%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016

year

1Y-3Y 3Y-5Y 5Y-7Y

0

1

2

3

4

5

6

7

8

2013 2014 2015 2016 ytd

BMO BNS CCDJ CM NACN RY TD


Issues are concentrated on

maturities between three and

five years

A breakdown of issues by maturity band makes clear that the majority of

new issues were issued in the 3Y-5Y maturity segment. While short-dated

maturities were only in single-digit percentages in previous years, this year’s

issuance volume already exceeds the previous year’s figure, meaning that

currently approximately 39% were issued in this segment. By and large, it is

striking that maturities of more than seven years have not been chosen by

issuers so far.



Page 14 of 34

Seven years represent the

maximum to date

An examination of maturities according to the respective issuer shows that

the National Bank of Canada is currently the only issuer of a covered bond

with a maturity of seven years. The most frequently chosen maturity, with 19

issues in total and an issuance volume of EUR 22.75bn (since 2013), is five

years.

Investors by country of origin Distribution by investor

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2013 2014 2015 2016

0%

10%

20%

30%

40%

50%

60%

Ba

nks

Asse

t M

an

ag

ers

Fu

nds

Cen

tra

l B

anks/S

SA

Insu

ran

ce

s

Pe

nsio

ns

Reta

il/P

rivate

We

alt

Corp

ora

tes

Hed

ge F

und

s

Oth

er

2013 2014 2015 2016


German investors are the

most important group of

investors

For Canadian issuers, German and Austrian investors are still the most im-

portant group of purchasers for EUR-denominated benchmark issuers, hav-

ing accounted for a share of ca. 36.3% on average since 2013. They are

lagged behind by some distance by investors from the UK and Ireland

(12.6% in 2016) and the Benelux states (2016: 11.0%). Investors from the

Nordics and Asia / Middle East accounted for an average share of issuance

volume of ca. 10% in the current year. A further breakdown of investors re-

veals that commercial banks take the largest share of an issue, around 43%

on average, although their share has fallen continuously in recent years.

This is offset by the allocation rate to central banks, which has risen from

18.8% since 2013 to the current figure of 29.8%.

Current spread level – Canada Spread trend (five years generic)

0

2

4

6

8

10

12

14

16

0 1 2 3 4 5 6 7 8 9 10

AS

W in

bp

maturity in years

BMO BNS CCDJ CM NACN RY TD CA

-20

-10

0

10

20

30

40

50

60

70

80

Mai 15 Jun 15 Jul 15 Aug 15 Sep 15 Okt 15 Nov 15 Dez 15 Jan 16 Feb 16 Mrz 16 Apr 16

ASW

in b

p

Core Eurozone Periphery Eurozone Periphery Multi

Other Europe Overseas CA

Source: Bloomberg, NORD/LB Fixed Income Research Source: Bloomberg, NORD/LB Fixed Income Research



Page 15 of 34

Secondary market – currently

very low spread level

When looking at the current spread level (EUR-denominated benchmark

bonds, which were represented in the iBoxx EUR Covered in April), it is strik-

ing that the outstanding issues of the seven benchmark issuers fall within a

narrow range in the respective maturity segment, whereby the curve trend

overall is relatively steep. We believe that the narrow spread of the various

issues is attributable to the high rating density of the individual covered bond

programmes and the lack of rating volatility. The spread trend (five years

maturity) in the last twelve months in comparison with the five covered bond

regions shows that Canadian covered bonds were slightly above the spread

level of covered bonds from Other Europe, although they even fell below this

spread level in recent months, meaning that they are currently at a very low

level from a historical perspective.

Conclusion Despite their relatively brief history, the development of Canadian covered

bonds may be viewed as a success story overall. The continuous (to date)

growth in issuance volume at a very narrow spread level illustrates not only

that the covered bond is a permanent part of Canadian issuers’ funding mix

but also that EUR-denominated benchmarks from Canada are very popular

at the same time, particularly with German and Austrian investors. Even the

regulatory disadvantage with the risk weighting and LCR classification in

comparison with issuers from the EAA does not seem to tempt investors to

prefer issuers from other regions at present.



Page 16 of 34

SSAs Purchases of regional bonds gaining momentum ahead of the ECB meeting

Analysts:

Mario Gruppe, CIIA


Purchases of regional and

local authorities’ bonds

have started

In December of last year, the ECB announced that it would also start pur-

chasing liquid bonds issued by regional and local authorities on the second-

ary market as part of its PSPP. The details concerning the purchases are

based on the previous PSPP for government bonds. The expansion in the

range of eligible securities to include bonds issued by Bundesländer and

regions has been interpreted by many market players as a more or less

German programme – however, it is clear that, in practice, other regions are

also popular.

Focus on German

Bundesländer

There is no other country in the Eurozone where the regions – that is the

Bundesländer in Germany – make such extensive use of the capital market

as a source of funding. With an outstanding volume of more than EUR

210bn, German Länder bonds represent far the largest share here. The cen-

tral bank wanted to counter any possible shortage with its measure. This had

been thoroughly discussed on the market, nevertheless the purchases of

Bunds play a major role in the PSPP due to Germany’s substantial share in

the ECB’s capital. The debate about shortages was also fuelled by the per-

sistently low interest rate level, which had led – at least temporarily – to the

Bund yield curve turning negative up to a maturity of nine years.

ECB purchase list for the PSPP – regional issuers

Issuer Jurisdiction Outstanding volumes Number of previously purchased ISINs

BERGER / HESSEN / NRW DE EUR 0.65-2.1bn 4 / 3 / 4

IDF (FR0011060037) FR EUR 410m 1

VDP (FR0013144052) FR EUR 300m 1

MADRID (ES0000101602 & ES0000101651) ES EUR 1.6-1.8bn 2

CASTIL (ES0001351396) ES EUR 650m 1

BASQUE (ES0000106551) ES EUR 500m 1

Source: ECB, NORD/LB Fixed Income Research

Berlin, Hesse and

NRW on the ECB’s

shopping list

However, looking at the ECB’s approach it now becomes clear that purchas-

es of regional bonds are so far only taking place to a limited extent. Even

though the Eurosystem does not provide details of the volumes purchased, a

glance at the absolute number of purchased bonds is enough to give a feel

for the significance of this PSPP segment to date. Until 15.04.2016, only 11

Länder bonds featured on the Eurosystem’s shopping list.

Investors disappointed

initially

In the meantime, there are signs of a certain disenchantment among inves-

tors regarding the cautious approach by the Eurosystem in this segment. The

spreads between Bunds and Länder bonds have recently widened according-

ly. This trend may well be interpreted – not alone but at least in part – as

disappointment among some market participants. Following the ECB’s an-

nouncement that it would expand the PSPP to include regional bonds, inves-

tors may have bought ahead in anticipation of prices rising in response to

additional central bank-driven demand and closed the relevant positions in

the meantime (cf. chart).



Page 17 of 34

Bund vs. NRW (ASW)

spread widening

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

12/15 01/16 02/16 03/16 04/16

DBR 0 1/2 02/15/25 NRW 1 01/16/25 Source: Bloomberg, NORD/LB Fixed Income Research

Interest rate cut reduces

pressure

In our opinion, the key reason for the defensive approach to purchases of

Länder bonds is to be found in the decision on interest rates in March.

Among other matters, the ECB decided to cut the deposit rate by 10bps to -

0.40% there. In conjunction with the subsequent market reaction, the poten-

tial supply of federal securities eligible for purchase increased once more.

Above all, some market participants had expected a far larger cut in the de-

posit rate. The resultant disappointment regarding this – boosted by Draghi’s

comments that the end of the road had finally been reached in terms of inter-

est rate cuts – led to yields rising to a certain extent. In particular, Bunds in

the maturity segment from five to six years could no longer be purchased

before the cut in interest rates. Meanwhile, they satisfy the requirements of

the Eurosystem once more, as their yield is no longer below the current de-

posit rate.

French and Spanish

regions purchased

Looking at the bonds purchased, it is also clear that this aspect of the PSPP

should not be misunderstood as a purely “German instrument”. Accordingly,

the first regional bond to find its way into the ECB’s books was the bond is-

sued by a French region (IDF). The Banque de France has also purchased a

bond issued by the City of Paris (VDP) in the meantime. The list is completed

by bonds from three Spanish regions, namely Madrid, the Basque Country,

and Castile and León. The use of the capital market to generate regional

funding is not unusual in Spain. However, the Banco de España may not buy

Catalan bonds due to their rating.

Decision creates more

flexibility

The effectiveness of this programme for the future should not be underesti-

mated. Even if the purchases have not been extensive so far, the Eurosys-

tem has, in principle, given itself more flexibility with the decision. This could

be of more significance in future – the PSPP will run for just under a year at

least. A number of market players assume that yields will plunge again. In

this case, the ECB would have the option to switch to Länder bonds accord-

ingly.

Conclusion and outlook So far, purchases from regional and local authorities by the ECB are playing

second fiddle to its purchases of government bonds. This has – most notably

with regard to German Länder – already led to a certain disappointment on

the part of investors. However, the significance of this “regional component”

should not be underestimated. It gives the Eurosystem additional flexibility,

which could become important in the course of the programme. The pur-

chase of the City of Paris bond shows that German cities (and local authori-

ties) could also make it onto the ECB’s shopping list.



Page 18 of 34

Covered Bonds/SSA ECB tracker

Analysts:



In this section, we publish weekly updates on the covered bonds, ABS, spe-

cific agencies, supranationals and sovereign bonds which the European

Central Bank (ECB) is purchasing under the CBPP3. We provide an over-

view of the development of purchases.

Increased CBPP3

activity

As of 15 April, the ECB reported an amount of EUR 169.257bn purchased

so far as part of the CBPP3. This represents an increase of EUR 2.425bn

on the previous week’s value, meaning that the pace of purchases in the

last four weeks has risen to EUR 5.847bn (previously EUR 5.231Bn) also on

account of basis effects. We are of the view that the reason behind the

highest weekly purchase volume since 22 January is a high level of pur-

chasing activity on the primary market. We estimate the purchase volume

there in the reporting period to be around EUR 1.6bn, with the focus of pur-

chasing activity on the primary market once more. On account of the low

issuing activity for the coming reporting period up to 22 April, we assume

that the pace of purchases will drop significantly. The volume of the ABSPP

rose by EUR 45.0m on the previous week’s figure to EUR 19.22bn, which

means that the pace of purchases in the past four weeks totals EUR 41.0m

due to repayments in the week to April 1. This is down slightly in comparison

with the previous week (EUR 95.0m).

PSPP purchases stagnate in

comparison to previous week

at EUR 18.2bn

In the past week, the ECB significantly expanded its purchases within the

framework of the PSPP and against the background of new resolutions. The

overall volume as at the reference date of 15 April rose by EUR 18.2bn to

EUR 689.063bn. This value is approximately EUR 600m below last week’s

figure. In this context, the Bank of Finland purchased two ISINs issued by

FINNVE. The interesting aspect of this transaction is that this issuer rarely

features on the (EUR) primary market, but just appeared last week. This

specific transaction has already found its way into the books via a detour

through the secondary market. This week, BDF will be concentrating on

three bonds from the ESM in addition to one from the EFSF as part of its

reverse auctions. Shorter, medium and ultra-long maturities will be targeted.

The planned target volume remains unchanged. Following the purchases of

Länder bonds, one further NRW bond was included in the central bank port-

folio last week. Considering there are only eleven German ISINs on the

official regional list so far, this will presumably be seen as a disappointing

overall development for the programme, which is currently having to con-

tend with a dwindling supply on the German secondary market. After VDP

came as something of a surprise last week, three new regional Spanish

bonds appeared on the list: While the issuer MADRID has already been

noted on the purchase list, CASTIL and BASQUE both were brand-new.

Upcoming reverse auctions (Banque de France – BDF)

ISIN Bond Central bank & date

EU000A1G0DF9 EFSF 0 1/8 11/04/19 Banque de France (15.04.)

EU000A1G0DG7 EFSF 0.1 01/19/21 Banque de France (15.04.)

EU000A1U9886 ESM 0.05 12/17/18 Banque de France (15.04.)

EU000A1U9928 ESM 1 5/8 11/17/36 Banque de France (15.04.)

Total targeted size: EUR 200-300m Source: BDF. NORD/LB Fixed Income Research



Page 19 of 34

Completed reverse auctions (DeNederlandscheBank – DNB)

ISIN Bond Min. Mean Max Date

XS1361603209 NEDWBK 0.05 02/10/21 N/A N/A N/A 11.04.

XS0765298095 NEDWBK 3 03/28/22 N/A N/A N/A 11.04.

XS1280394229 BNG 0 1/2 08/26/22 102,750 102,750 102,750 11.04.

XS0821096418 BNG 2 1/4 08/30/22 113,910 113,910 113,910 11.04.

XS1312042648 NEDWBK 0 1/2 10/27/22 N/A N/A N/A 11.04.

XS1346315382 NEDWBK 0 1/2 01/19/23 102,570 102,575 102,580 11.04.

XS1368698251 BNG 0 1/4 02/22/23 N/A N/A N/A 11.04.

XS0953222550 BNG 2 1/4 07/17/23 N/A N/A N/A 11.04.

XS1105954256 BNG 1 1/8 09/04/24 N/A N/A N/A 11.04.

XS1342516629 BNG 1 01/12/26 104,820 104,835 104,855 11.04.

Total Amount Offered EUR 199 Mio.

Total Amount Allocated EUR 50 Mio.

Source: DNB, NORD/LB Fixed Income Research

ECB purchase list for PSPP – regional issuers

Issuer Jurisdiction ISINs already purchased

BADWUR GE -

BAYERN GE -

BERGER GE 4

BREMEN GE -

BRABUR GE -

HESSEN GE 3

HAMBRG GE -

NIESA GE -

MECVOR GE -

NRW GE 4

RHIPAL GE -

SAARLD GE -

SCHHOL GE -

SAXONY GE -

SACHAN GE -

THRGN GE -

LAENDER GE -

IDF FR 1

VDP FR 1

MADRID ES 2

CASTIL ES 1

BASQUE ES 1

Source: ECB. NORD/LB Fixed Income Research



Page 20 of 34

ECB purchase list for PSPP

Issuer Jurisdiction ISINs already purchased

EIB SNAT 47

EFSF SNAT 30

ESM SNAT 11

EU SNAT 19

COE SNAT 6

NIB SNAT 1

EURAT SNAT -

KFW GE 35

RENTEN GE 12

NRWBK GE 13

LBANK GE 5

CADES FR 17

RESFER FR 11

UNEDIC FR 15

AGFRNC FR 13

OSEOFI FR 9

CDCEPS FR 3

CNA FR 2

ACOSS FR -

BNG NL 20

NEDWBK NL 12

NEDFIN NL 2

OBND AT 8

ASFING AT 7

FINNVE FI 4

TVRFIN FI 1

ICO ES 8

ADIFAL ES 3

CDEP IT 3

FERROV IT 2

ENELIM IT 1

SRGIM IT 5

TRNIM IT 3

IP (REFER / ESTPOR) PT -

ENMC PT -

SEDABI SI 1

DARSDD SI -




Page 21 of 34

CBPP3 Overview

Weekly purchase volume [EURbn] Primary and secondary market share [EURbn]

140

145

150

155

160

165

170

175

0.0

0.5

1.0

1.5

2.0

2.5

3.0

05.0

2.1

6

12.0

2.1

6

19.0

2.1

6

26.0

2.1

6

04.0

3.1

6

11.0

3.1

6

18.0

3.1

6

25.0

3.1

6

01.0

4.1

6

08.0

4.1

6

15.0

4.1

6

Weekly purchases Total volume (rhs)

0

20

40

60

80

100

120

140

160

180

0

2

4

6

8

10

12

14

Oct-

14

Nov-1

4

Dec-1

4

Ja

n-1

5

Fe

b-1

5

Ma

r-15

Ap

r-15

Ma

y-1

5

Ju

n-1

5

Ju

l-1

5

Au

g-1

5

Se

p-1

5

Oct-

15

Nov-1

5

Dec-1

5

Ja

n-1

6

Fe

b-1

6

Ma

r-16

Primary market Secondary market Total volume (rhs)

Source: Bloomberg. NORD/LB Fixed Income Research Source: ECB. NORD/LB Fixed Income Research

Total volume of covered bond purchase programmes [EURbn]

0

50

100

150

200

250

Ju

l-0

9

Nov-0

9

Ma

r-10

Ju

l-1

0

Nov-1

0

Ma

r-11

Ju

l-1

1

Nov-1

1

Ma

r-12

Ju

l-1

2

Nov-1

2

Ma

r-13

Ju

l-1

3

Nov-1

3

Ma

r-14

Ju

l-1

4

Nov-1

4

Ma

r-15

Ju

l-1

5

Nov-1

5

Ma

r-16

CBPP1 [EUR 19.1bn] CBPP2 [EUR 8.6bn] CBPP3 [EUR 169.3bn]

Source: Bloomberg. NORD/LB Fixed Income Research current volume in [ ]



Page 22 of 34

PSPP overview

Weekly purchase volume [EUR bn] Distribution by country at month-end [EUR bn]

0

100

200

300

400

500

600

700

800

0

2

4

6

8

10

12

14

16

18

20

05.0

2.1

6

12.0

2.1

6

19.0

2.1

6

26.0

2.1

6

04.0

3.1

6

11.0

3.1

6

18.0

3.1

6

25.0

3.1

6

01.0

4.1

6

08.0

4.1

6

15.0

4.1

6

Weekly purchases Total volume (rhs)

Source: Bloomberg. NORD/LB Fixed Income Research Source: ECB. NORD/LB Fixed Income Research

Overall distribution of PSPP buying at month-end (EURbn)

Country Adjusted

distribution key1

Purchases (EUR m)

Expected purchases (EUR m)

2

Difference (EUR m)

Average time to maturity in

years

Market average in years

3

Difference in years

DE 26.3% 152,823 151,592 1,231 7.05 12.0 -5.0

FR 20.7% 121,578 119,432 2,146 7.67 9.9 -2.2

IT 18.0% 104,796 103,695 1,101 9.35 7.6 1.7

SNAT 0.0% 78,974 78,516 458 6.92 9.6 -2.7

ES 12.9% 75,160 74,468 692 9.68 7.6 2.1

NE 5.9% 34,006 33,722 284 6.86 10.2 -3.3

BE 3.6% 21,023 20,871 152 9.74 12.0 -2.2

AT 2.9% 16,699 16,535 164 8.51 10.9 -2.4

PT 2.6% 14,844 14,685 159 10.18 7.7 2.5

FI 1.8% 10,703 10,583 120 7.67 9.5 -1.9

IE 1.7% 9,974 9,777 197 9.42 9.1 0.3

SK 1.1% 6,184 6,507 -323 8.24 8.6 -0.3

SI 0.5% 2,997 2,910 87 7.74 7.7 0.0

LU 0.3% 1,538 1,710 -172 6.14 9.0 -2.9

LV 0.4% 801 2,376 -1,575 5.45 5.7 -0.3

LT 0.6% 1,450 3,480 -2,030 6.70 7.0 -0.3

MT 0.1% 424 546 -122 10.40 10.1 0.3

CY 0.2% 269 888 -619 5.52 6.2 -0.6

EE 0.3% 60 1,624 -1,564 2.28 0.0 2.3

GR 0.0% 0 0 0

13.5 -

Total / average

100.0% 654,303 - - 8.05 9.14 -1.1

1 Based on the ECB capital key. adjusted to include supras and the disqualification of Greece

.

2 Based on the adjusted distribution key.

3 Weighted average time to maturity of the bonds eligible for purchasing under the PSPP.




Page 23 of 34

Covered Bonds Charts & Graphs

Outstanding volume (Bmk.) Top 10 countries (Bmk.)

21.2%

20.1%

12.0%8.1%

5.3%

4.3%

4.1%

3.9%

3.2%

2.9%

15.0%

EUR 1098bn

FR

ES

DE

IT

GB

NL

NO

CA

SE

AT

Others

Country Vol. (€bn) No. of CBs ØVol. (€bn) Vol. weight.

ØMod. Duration

FR 232.4 175 1.3 4.2

ES 220.2 168 1.3 3.1

DE 131.6 193 0.7 3.6

IT 88.4 87 1.0 3.0

GB 58.7 48 1.2 3.8

NL 47.2 36 1.3 5.1

NO 44.9 43 1.0 3.3

CA 42.4 34 1.2 3.8

SE 35.4 34 1.0 3.7

AT 31.8 48 0.7 3.1

Issue volume by year (Bmk.) Maturities next 12 months (Bmk.)

0

50

100

150

200

250

300

350

2011 2012 2013 2014 2015 2016

EU

Rb

n


0

5

10

15

20

25

30

35

40

04/1

6

05/1

6

06/1

6

07/1

6

08/1

6

09/1

6

10/1

6

11/1

6

12/1

6

01/1

7

02/1

7

03/1

7

EU

Rb

n


Avg. mod. duration by country (vol. weighted) Rating distribution (vol. weighted)

0

1

2

3

4

5

6

AT

AU

BE

CA

CH

CZ

DE

DK

ES FI

FR

GB IE IT LU

NL

NO

NZ

PT

SE

SG

62.2%

4.4%15.7%

0.9%

5.2%

4.6%0.5%

0.8%

1.7%

3.9%

0.3%

6.7%

AAA/Aaa

AA+/Aa1

AA/Aa2

AA-/Aa3

A+/A1

A/A2

A-/A3

BBB+/Baa1

BBB/Baa2

BBB-/Baa3

BB+/Ba1

BB/Ba2

BB-/Ba3

Source: Bloomberg. NORD/LB Fixed Income Research



Page 24 of 34


Spread development (last 15 issues)

LEED

0 1

/8 0

4/2

1/2

0

PB

BG

R 1 1

/4 0

4/2

0/3

5

EIK

BO

L 0 3

/8 0

4/2

0/2

3

BM

O 0

1/8

04/1

9/2

1

DN

BN

O 0 1

/4 0

4/1

8/2

3

MU

NH

YP 0 1

/2 0

4/2

2/2

6

AB

NA

NV

1 0

4/1

3/3

1

AS

BB

NK

0 1

/4 0

4/1

4/2

1

CA

FFIL

0 5

/8 0

4/1

3/2

6

LA

NS

BK

0 1

/4 0

4/1

2/2

3

LLO

YD

S 0

1/2

04/1

1/2

3

BPS

OIM

0 3

/4 0

4/0

4/2

3

LA

NS

NA

0 3

/8 0

3/3

1/2

3

WLB

AN

K 0

.2 0

3/2

4/2

3

BR

F 0

1/4

04/0

1/2

1

-10

0

10

20

30

40

50

60

bp

Reoffer Spread Current ASW

Bid-to-Cover (last 15 issues)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

LE

ED

0 1

/8 0

4/2

1/2

0

PB

BG

R 1

1/4

04/2

0/3

5

EIK

BO

L 0

3/8

04/2

0/2

3

BM

O 0

1/8

04/1

9/2

1

DN

BN

O 0

1/4

04/1

8/2

3

MU

NH

YP

0 1

/2 0

4/2

2/2

6

AB

NA

NV

1 0

4/1

3/3

1

AS

BB

NK

0 1

/4 0

4/1

4/2

1

CA

FF

IL 0

5/8

04/1

3/2

6

LA

NS

BK

0 1

/4 0

4/1

2/2

3

LLO

YD

S 0

1/2

04/1

1/2

3

BP

SO

IM 0

3/4

04/0

4/2

3

LA

NS

NA

0 3

/8 0

3/3

1/2

3

WLB

AN

K 0

.2 0

3/2

4/2

3

BR

F 0

1/4

04/0

1/2

1

EU

Rbn

Amt. Issued Order Book Bid-to-Cover (rhs)

Spread development by country Performance (total return)

-30 -25 -20 -15 -10 -5 0 5 10

USSGSEPTNZNONLITIE

GBFRFI

ES - SingleES - Multi

DKDECHCABEAUAT

bpΔ 3 Months Δ Week Δ Month

0% 5% 10% 15% 20%

Overall

1-3Y

3-5Y

5-7Y

7-10Y

2016 ytd

2015

2014

2013

2012

2011




Page 25 of 34


Germany & Austria France

-20

-10

0

10

20

30

40

50

60

0 1 2 3 4 5 6 7 8 9 10

AS

W in b

p

years to maturity

AT DE - Öpfe DE - Hypfe DE - Others

-10

-5

0

5

10

15

20

25

30

0 1 2 3 4 5 6 7 8 9 10

AS

W in b

p

years to maturityOF OH Structured

Nordics Other Core

-5

0

5

10

15

20

25

30

0 1 2 3 4 5 6 7 8 9 10

AS

W in b

p

years to maturityDK FI NO SE

-10

-5

0

5

10

15

20

25

30

35

0 1 2 3 4 5 6 7 8 9 10

AS

W in b

p

years to maturityBE CH GB LU NL

Overseas Periphery

-5

0

5

10

15

20

25

30

35

40

0 1 2 3 4 5 6 7 8 9 10

AS

W in b

p

years to maturityAU CA NZ SG US

0

25

50

75

100

125

0 1 2 3 4 5 6 7 8 9 10

AS

W in b

p

years to maturity

ES - Single ES - Multi IE IT PT




Page 26 of 34

SSA Charts & Graphs

Outstanding volume (Bmk.) Top 10 countries (Bmk.)

37,7%

36,2%

11,2%

5,2%

4,4% 1,7%

1,1%

0,7%

0,3%

0,3%

1,1%

5,2%

EUR 1473,4bn GE

SNAT

FR

SP

NE

AS

CA

IT

PO

FI

Others

Country Vol. (€bn) No. of bonds

ØVol. (€bn) Vol. weight.

ØMod. Duration

GE 555,9 478 1,2 3,9

SNAT 533,8 121 4,4 6,5

FR 165,3 100 1,7 5,5

SP 77,1 62 1,2 3,0

NE 64,4 57 1,1 4,3

AS 24,9 24 1,0 6,6

CA 16,6 12 1,4 5,1

IT 10,7 11 1,0 8,1

PO 4,8 8 0,6 4,4

FI 4,3 5 0,9 6,4

Issue volume by year (Bmk.) Maturities next 12 months (Bmk.)

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e

EU

Rb

n

Other

ES

AT

NL

FR

GE

SNAT

0

5

10

15

20

25

30

3504

/16

05

/16

06

/16

07

/16

08

/16

09

/16

10

/16

11

/16

12

/16

01

/17

02

/17

03

/17

EU

Rb

n

Other

ES

AT

NL

FR

GE

SNAT

Avg. mod. duration by country (vol. weighted) Rating distribution (vol. weighted)

0

1

2

3

4

5

6

7

8

9

10

GE

SN

AT

FR

SP

NE

AS IT

PO

BE

SW

43,6%

14,5%

25,7%

7,7%

0,3%

4,0%

0,8%

0,5%

0,2%

1,0%

2,9%

AAA/Aaa

AA+/Aa1

AA/Aa2

AA-/Aa3

A+/A1

A/A2

A-/A3

BBB+/Baa1

BBB/Baa2

BBB-/Baa3

BB+/Ba1

BB/Ba2

BB-/Ba3

B+/B1

B/B2

B-/B3

NR




Page 27 of 34

SSA Charts & Graphs

Spread development (last 15 issues) E

UR

OF

0 1

/4 0

4/2

5/2

3

(fix

ed

)

ES

M 0

1/8

04/2

2/2

4 (

fixed)

KB

N 0

5/8

04/2

0/2

6 (

fixed)

NR

W 0

1/2

04/1

6/2

6

(fix

ed

)

LA

ND

ER

0 1

/8 0

4/1

4/2

3

(fix

ed

)

FIN

NV

E 0

1/2

04

/13

/26

(f

ixed)

LB

AN

K 0

3/8

04/1

3/2

6

(fix

ed

)

EU

0 3

/4 0

4/0

4/3

1 (

fixed)

EIB

0 3

/8 0

4/1

4/2

6 (

fixed)

ICO

0.1

09/1

2/1

8 (

fixed)

RE

SF

ER

1 1

/2 0

5/2

9/3

7

(fix

ed

)

UN

ED

IC 0

1/4

11/2

4/2

3

(fix

ed

)

KO

MM

UN

0 1

/4 0

3/2

9/2

3

(fix

ed

)

KU

NT

A 0

.1 1

0/1

5/2

1

(fix

ed

)

BE

RG

ER

0 5

/8 0

3/2

0/2

6

(fix

ed

)

-20

-10

0

10

20

30

40

50

60

bp

Reoffer Spread / DM Current ASW / DM

Spread development by country Performance (total return)

-20 -15 -10 -5 0 5

GE

SNAT

FR

SP

NE

AS

bp1W 1M 3M

-5% 0% 5% 10% 15% 20% 25% 30%

Overall

1-3

3-5

5-7

7-10

10+

YTD

2015

2014

2013

2012

2011

Performance (total return) – 2015 Performance (total return) – 2015

-1% -1% 0% 1% 1% 2% 2% 3% 3% 4%

Supras

Agencies

Public Banks

Regions

Bundesländer

Periphery

Non-Periphery

1W

1M

3M

6M

12M

YTD

-1% 0% 1% 1% 2% 2% 3% 3%

Overall

AAA

AA

A

BBB

1W

1M

3M

6M

12M

YTD




Page 28 of 34

SSA Charts & Graphs

Germany (by segments) France (by risk weight)

-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

0 1 2 3 4 5 6 7 8 9 10

AS

W in

bp

years to maturity

National agencies Bundesländer Regional agencies Bunds

-30

-20

-10

0

10

20

30

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

AS

W in

bp

years to maturity

RW: 0% RW: 20% OATs

Netherlands & Austria Supranationals

-40

-30

-20

-10

0

10

20

30

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

AS

W in

bp

years to maturity

Dutch agencies DSLs Austria Austrian agencies

-60

-50

-40

-30

-20

-10

0

10

20

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

AS

W in

bp

years to maturity

Supranationals Supranationals Bunds OATs

Core Periphery

-30

-20

-10

0

10

20

30

0 1 2 3 4 5 6 7 8 9 10

AS

W in

bp

years to maturityGerman nat. agencies Bundesländer

German reg. agencies French RW: 0%

French RW: 20% Dutch agencies

Austrian agencies Supras

-50

0

50

100

150

200

250

300

0 1 2 3 4 5 6 7 8 9 10

AS

W in

bp

years to maturity

Spanish agencies Spanish regions Italian agencies

Portuguese agencies Bonos BTPs

Portugal




Page 29 of 34

Appendix Publication overview

Publication Topics

14/2016 13 April Market overview

UK collateral in German cover pools

Mortgage Society of Finland plans inaugural issue

ESM and EFSF present funding plan for Q2

ECB Tracker

13/2016 6 April Market overview

Covered Bonds in Q1

Overview of PSPP holdings

ECB Tracker

12/2016 30 March Market overview

Progress with the restructuring of Nordea Bank Finland

Irish subsidiary of EAA to be sold

Expansion of the ISIN limit results in spread movements for supranationals

ECB Tracker


Moody’s quarterly report Q3/2015

Federal financial equalisation scheme reachesrecord sum in 2015

ECB Tracker


TLTRO will reduce primary market volume in 2016

Section 28 data published for Q4/2015

ECB expands purchases – what can we expect now?

ECB Tracker


Restructuring of Nordea Bank Finland

Relative value on rates-products

Overview of PSPP holdings

ECB Tracker


Ramifications of a potential Brexit on UK covered bonds

Possible Brexit, the EIB and then what?

ECB Tracker

07/2016 24 February Market overview

Yield level on the covered bond market

German Länder deliver positive budget figures

ECB Tracker



Page 30 of 34

Appendix Contacts

Fixed Income Research

Michael Schulz Head +49 511 361-5309 [email protected]

Kai Niklas Ebeling Covered Bonds +49 511 361-9713 [email protected]

Mario Gruppe Public Issuers +49 511 361-9787 [email protected]

Michaela Hessmert Banks +49 511 361-6915 [email protected]

Christopher Kief Corporates / Retail Products +49 511 361-4710 [email protected]

Melanie Kiene Banks +49 511 361-4108 [email protected]

Jörg Kuypers Corporates / Retail Products +49 511 361-9552 [email protected]

Matthias Melms Covered Bonds +49 511 361-5427 [email protected]

Sascha Remus Corporates / Retail Products +49 511 361-2722 [email protected]

Norman Rudschuck Public Issuers +49 511 361-6627 [email protected]

Martin Strohmeier Corporates / Retail Products +49 511 361-4712 [email protected]

Kai Witt Corporates / Retail Products +49 511 361-4639 [email protected]

Markets Sales

Carsten Demmler Head +49 511 361-5587 [email protected]

Institutional Sales (+49 511 9818-9440)

Julia Bleser [email protected] Gabriele Schneider [email protected]

Thorsten Bock [email protected] Dirk Scholden [email protected]

Uwe Kollster [email protected] Uwe Tacke [email protected]

Daniel Novotny-Farkas [email protected]

Sales Savings Banks / Regional Banks (+49 511 9818-9400)

Christian Schneider

(Head) [email protected] Stefan Krilcic [email protected]

Oliver Bickel [email protected] Martin Koch [email protected]

Tobias Bohr [email protected] Bernd Lehmann [email protected]

Kai-Ulrich Dörries [email protected] Jörn Meißner [email protected]

Marc Ehle [email protected] Lutz Schimanski [email protected]

Sascha Goetz [email protected] Brian Zander [email protected]

Fixed Income / Structured Products Sales Europe (+352 452211-515)

René Rindert (Head) [email protected] Patricia Lamas [email protected]

Morgan Kermel [email protected] Laurence Payet [email protected]

Corporate Sales

Shipping / Aircraft +49 511 9818-8150 Corporate Clients +49 511 9818-4003

Real Estate / Structured Finance

+49 511 9818-8150 FX/MM +49 511 9818-4006

Syndicate / DCM (+49 511 9818-6600)

Thomas Cohrs (Head) [email protected] Andreas Raimchen [email protected]

Axel Hinzmann [email protected] Udo A. Schacht [email protected]

Thomas Höfermann [email protected] Marco da Silva [email protected]

Alexander Malitsky [email protected] Lutz Ulbrich [email protected]

Julien Marchand [email protected]

Financial Markets Trading

Jumbos / Covered Bonds +49 511 9818-8040 Frequent Issuers +49 511 9818-9640

Collateral Mgmt / Repos +49 511 9818-9200 Governments +49 511 9818-9660

Financials +49 511 9818-9490 Structured Products +49 511 9818-9670

Customer Exec. & Trading

+49 511 9818-9480

mailto:[email protected]










Page 31 of 34

Disclaimer

This financial analysis (hereinafter the „Analysis”) was drawn up by NORDDEUTSCHE LANDESBANK GIROZENTRALE („NORD/LB“).

The supervisory authorities in charge of NORD/LB are the European Central Bank („ECB“). Sonnemannstraße 20. D-60314 Frankfurt am

Main. and the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleitungsaufsicht - „BaFin“). Graurheindorfer Str.

108. D-53117 Bonn. and Marie-Curie-Str. 24-28. D-60439 Frankfurt am Main. Details about the extent of NORD/LB´s regulation by the

respective authorities are available on request. Generally. this Analysis or the products or services described therein have not been

reviewed or approved by the competent supervisory authority.

This Analysis is addressed exclusively to recipients professional and institutional clients in Germany. the United Kingdom. Austria. Bel-

gium. Italy. Spain. Denmark. Finland. Estonia. France. Greece. Ireland. Luxembourg. the Netherlands. Poland. Portugal. Sweden. the

Czech Republic. Canada. Switzerland and Cyprus (hereinafter the „Relevant Persons” or „Recipients”). The contents of this Analysis are

disclosed to the Recipients on a strictly confidential basis and. by accepting this Analysis. the Recipients agree that they will not forward

to third parties. copy and/or reproduce this Analysis without NORD/LB’s prior written consent. The figures discussed in this Analysis are

only addressed to the Relevant Persons and any persons other than the Relevant Persons must not rely on this Analysis. In particular.

neither this Analysis nor any copy thereof must be forwarded or transmitted to the United States of America or its territories or posses-

sions or distributed to any employees or affiliates of Recipients resident in these jurisdictions.

This Analysis was drawn up in compliance with the applicable provisions of the German Securities Trading Act (Wertpapierhan-

delsgesetz) and the Regulation Governing the Analysis of Financial Instruments (Verordnung über die Analyse von Finanzinstrumenten).

In organizational. hierarchical. functional and local terms. the Research Division of NORD/LB is independent of any divisions responsible

for the issuance of securities and investment banking activities. for trading (including proprietary trading) in and sales of securities as

well as for lending activities.

This Analysis and the information contained herein have been compiled and are provided exclusively for information purposes. This

Analysis is not intended as an investment incentive. It is provided for the Recipient’s personal information. subject to the express under-

standing. which is acknowledged by the Recipient. that it does not constitute any direct or indirect offer. individual recommendation.

solicitation to purchase. hold or sell or to subscribe for or acquire any securities or other financial instruments nor any measure by which

financial instruments might be offered or sold.

All actual details. information and statements contained herein were derived from sources considered reliable by NORD/LB. However.

since these sources are not verified independently. NORD/LB cannot give any assurance as to or assume responsibility for the accuracy

and completeness of the information contained herein. The opinions and prognoses given herein on the basis of these sources consti-

tute a non-binding evaluation by the analysts of NORD/LB. Any changes in the underlying premises may have a material impact on the

developments described herein. Neither NORD/LB nor its governing bodies or employees can give any assurance as to or assume any

responsibility or liability for the accuracy. adequacy and completeness of this Analysis or any loss of return. any indirect. consequential

or other damage which may be suffered by persons relying on the information or any statements or opinions set forth in this Analysis

(irrespective of whether such losses are incurred due to any negligence on the part of these persons or otherwise).

Past performances are not a reliable indicator of future performances. Exchange rates. price fluctuations of the financial instruments and

similar factors may have a negative impact on the value and price of and return on the financial instruments referred to herein or any

instruments linked thereto. An evaluation made on the basis of the historical performance of any security does not necessarily give an

indication of its future performance.

This Analysis neither constitutes any investment. legal. accounting or tax advice nor any representation that an investment or strategy is

suitable or appropriate in the light a Recipient’s individual circumstances. and nothing in this Analysis constitutes a personal recommen-

dation to the Recipient thereof. The securities or other financial instruments referred to herein may not be suitable for the Recipient’s

personal investment strategies and objectives. financial situation or individual needs.

Also this Analysis as a whole or any part thereof is not a sales or other prospectus. Correspondingly. the information contained herein

merely constitutes an overview and does not form the basis for an investor‘s potential decision to buy or sell. A full description of the

details relating to the financial instruments or transactions which may relate to the subject matter of this Analysis is set forth in the rele-

vant (financing) documentation. To the extent that the financial instruments described herein are NORD/LB’s own issues and subject to

the requirement to publish a prospectus. the conditions of issue applicable to any individual financial instrument and the relevant pro-

spectus published with respect thereto as well NORD/LB’s relevant registration form. all of which are available for downloading at

www.nordlb.de and may be obtained. free of charge. from NORD/LB. Georgsplatz 1. 30159 Hanover. shall be solely binding. Any poten-

tial investment decision should at any rate be made exclusively on the basis of such (financing) documentation. This Analysis cannot

replace personal advice. Before making an investment decision. each Recipient should consult an independent investment adviser for

individual investment advice with respect to the appropriateness of an investment in financial instruments or investment strategies as

contemplated herein as well as for other and more recent information on certain investment opportunities.

Each of the financial instruments referred to herein may involve substantial risks. including capital. interest. index. currency and credit

risks. political. fair value. commodity and market risks. The financial instruments could experience a sudden substantial deterioration in

value. including a total loss of the capital invested. Each transaction should only be entered into on the basis of the relevant investor’s

assessment of its individual financial situation as well as of the suitability and risks of the investment.

NORD/LB and its affiliates may. for their own account or for the account of third parties. participate in transactions involving the financial

instruments described herein or any underlying assets. issue further financial instruments having terms that are the same as or similar to

those governing the financial instruments referred to herein as well as enter into transactions to hedge positions. Such actions may affect

the price of the financial instruments described in this Analysis.

To the extent the financial instruments referred to herein are derivatives. they may involve an initial negative market value from the

customer’s point of view. depending on the terms and conditions prevailing as of the transaction date. Furthermore. NORD/LB reserves

the right to pass on its economic risk from any derivative transaction it has entered into to third parties in the market by way of a mirror

image counter-transaction.

Further information on any fees which may be included in the sales price is set forth in the brochure „Customer Information Relating to

Securities Transactions“ which is available at www.nordlb.de.



Page 32 of 34

The information set forth in this Analysis shall supersede all previous versions of any relevant Analysis and refer exclusively to the date

as of which this Analysis has been drawn up. Any future versions of this Analysis shall supersede this present version. NORD/LB shall

not be under any obligation to update and/or review this Analysis at regular intervals. Therefore. no assurance can be given as to its

currentness and continued accuracy.

By making use of this Analysis. the Recipient shall accept the foregoing terms and conditions.

NORD/LB is a member of the protection scheme of Deutsche Sparkassen-Finanzgruppe. Further information for the Recipient is set

forth in clause 28 of the General Terms and Conditions of NORD/LB or at www.dsgv.de/sicherungssystem.Additional information for

recipients in the UK

NORD/LB subject to limited regulation by the Financial Conduct Authority (“FCA”) und Prudential Regulation Authority (“PRA”). Details

about the extent of our regulation by the FCA and PRA are available from NORD/LB on request.

This Analysis is a financial promotion. Relevant Persons in the UK should contact NORD/LB’s London Branch. Investment Banking

Department. Telephone: 0044 / 2079725400 with any queries.

Investing in financial instruments referred to in this Analysis may expose an investor to a significant risk of losing all of the amount in-

vested.

Additional information for recipients in France

NORD/LB is partially regulated by the Autorité des Marchés Financiers for the conduct of French business. Details about the extent of

our regulation by the respective authorities are available from us on request.

This Analysis does constitute investment research within the meaning of Article 24(1) Directive 2006/73/EC. Article L.544-1 and R.621-

30-1 of the French Monetary and Financial Code and does qualify as research recommendation under Directive 2003/6/EC and Directive

2003/125/EC.

Additional information for recipients in Austria

None of the information contained in this Analysis constitutes a solicitation or offer by NORD/LB or its affiliates to buy or sell any securi-

ties. futures. options or other financial instruments or to participate in any other strategy. Only the published prospectus pursuant to the

Austrian Capital Market Act should be the basis for any investment decision of the Recipient.

For regulatory reasons. products mentioned in this Analysis may not being offered into Austria and are not available to investors in Aus-

tria. Therefore. NORD/LB might not be able to sell or issue these products. nor shall it accept any request to sell or issues these prod-

ucts. to investors located in Austria or to intermediaries acting on behalf of any such investors.

Additional information for recipients in Belgium

Evaluations of individual financial instruments on the basis of past performance are not necessarily indicative of future results. It should

be noted that the reported figures relate to past years.

Additional information for recipients in Cyprus

This Analysis does constitute investment research within the meaning of the definition section of the Cyprus Directive D1444-2007-

01(No 426/07). Furthermore. this material is provided for informational and advertising purposes only and does not constitute an invita-

tion or offer to sell or buy or subscribe any investment product.

Additional information for recipients in Denmark

This Analysis does not constitute a prospectus under Danish securities law and consequently is not required to be nor has been filed

with or approved by the Danish Financial Supervisory Authority as this Analysis either (i) has not been prepared in the context of a public

offering of securities in Denmark or the admission of securities to trading on a regulated market within the meaning of the Danish Securi-

ties Trading Act or any executive orders issued pursuant thereto. or (ii) has been prepared in the context of a public offering of securities

in Denmark or the admission of securities to trading on a regulated market in reliance on one or more of the exemptions from the re-

quirement to prepare and publish a prospectus in the Danish Securities Trading Act or any executive orders issued pursuant thereto.

Additional information for recipients in Greece

The information herein contained describes the view of the author at the time of its publication and it must not be used by its Recipient

unless having first confirmed that it remains accurate and up to date at the time of its use.

Past performance. simulations or forecasts are therefore not a reliable indicator of future results. Mutual funds have no guaranteed

performance and past returns do not guarantee future performance.

Additional information for recipients in Ireland

This Analysis has not been prepared in accordance with Directive 2003/71/EC. as amended. on prospectuses (the “Prospectus Di-

rective”) or any measures made under the Prospectus Directive or the laws of any Member State or EEA treaty adherent state that

implement the Prospectus Directive or those measures and therefore may not contain all the information required where a document is

prepared pursuant to the Prospectus Directive or those laws.

Additional information for recipients in Luxembourg

Under no circumstances shall this Analysis constitute an offer to sell. or issue or the solicitation of an offer to buy or subscribe for Prod-

ucts or Services in Luxembourg.

Additional information for recipients in Netherlands

The value of your investments may fluctuate. Results achieved in the past do not offer any guarantee for the future (De waarde van uw

belegging kan fluctueren. In het verleden behaalde resultaten bieden geen garantie voor de toekomst).

Additional information for recipients in Poland

This Analysis does not constitute a recommendation within the meaning of the Regulation of the Polish Minister of Finance Regarding

Information Constituting Recommendations Concerning Financial Instruments or Issuers thereof dated 19 October 2005.



Page 33 of 34

Additional information for recipients in Portugal

This Analysis is intended only for institutional clients and may not be (i) used by. (ii) copied by any means or (iii) distributed to any other

kind of investor. in particular not to retail clients. This Analysis does not constitute or form part of an offer to buy or sell any of the securi-

ties covered by the report nor can be understood as a request to buy or sell securities where that practise may be deemed unlawful. This

Analysis is based on information obtained from sources which we believe to be reliable. but is not guaranteed as to accuracy or com-

pleteness. Unless otherwise stated. all views herein contained are solely expression of our research and analysis and subject to change

without notice.

Additional information for recipients in Sweden

This Analysis does not constitute or form part of. and should not be construed as a prospectus or offering memorandum or an offer or

invitation to acquire. sell. subscribe for or otherwise trade in shares. subscription rights or other securities nor shall it or any part of it form

the basis of or be relied on in connection with any contract or commitment whatsoever. This Analysis has not been approved by any

regulatory authority. Any offer of securities will only be made pursuant to an applicable prospectus exemption under EC Prospectus

Directive. and no offer of securities is being directed to any person or investor in any jurisdiction where such action is wholly or partially

subject to legal restrictions or where such action would require additional prospectuses. other offer documentation. registrations or other

actions.

Additional information for recipients in Switzerland

This Analysis has not been approved by the Federal Banking Commission (merged into the Swiss Financial Market Supervisory Authori-

ty “FINMA” on 1 January 2009).

NORD/LB will comply with the Directives of the Swiss Bankers Association on the Independence of Financial Research. as amended.

This Analysis does not constitute an issuing prospectus pursuant to article 652a or article 1156 of the Swiss Code of Obligations. This

Analysis is published solely for the purpose of information on the products mentioned in this advertisement. The products do not qualify

as units of a collective investment scheme pursuant to the Federal Act on Collective Investment Schemes (CISA) and are therefore not

subject to the supervision by the Swiss Financial Market Supervisory Authority (FINMA).

Additional information for recipients in Canada

This Analysis has been prepared for informational purposes only in relation to the products contained in this material and is not. under

any circumstances to be construed as an offering memorandum or as an offering of any securities for sale directly or indirectly in any

province or territory of Canada.

No securities commission or similar regulatory authority in Canada has passed on the merits of these securities nor has it reviewed this

material and any representation to the contrary is an offence.

Relevant selling restrictions. if any. are contained in the prospectus or other documentation for the respective product.

Additional information for recipients in Estonia

It is advisable to examine all the terms and conditions of the services provided by NORD/LB. If necessary. Recipient of this Analysis

should consult with an expert.

Additional information for recipients in Finland

The financial products described in this Analysis may not be offered or sold. directly or indirectly. to any resident of the Republic of Fin-

land or in the Republic of Finland. except pursuant to applicable Finnish laws and regulations. Specifically. in the case of shares. those

shares may not be offered or sold. directly or indirectly. to the public in the Republic of Finland as defined in the Finnish Securities Mar-

ket Act (746/2012. as amended). The value of investments may go up or down. There is no guarantee to get back the invested amount.

Past performance is no guarantee of future results.

Additional information for recipients in Czech Republic

There is no guarantee to get back the invested amount. Past performance is no guarantee of future results. The value of investments

could go up and down

The information contained in this Analysis is provided on a non-reliance basis and its author does not accept any responsibility for its

content in terms of correctness. accuracy or otherwise.



Page 34 of 34

Arrangements for the confidential treatment of sensitive customer and business data as well as for avoiding and handling conflicts of

interest

NORD/LB has separated its business divisions that may have access to sensitive customer and business data (confidential areas) from

its other divisions (e.g. NORD/LB Research) in terms of functions and locations and/or via relevant data processing arrangements.

The disclosure of confidential information that may have an impact on the prices of securities is monitored by NORD/LB’s Compliance

Unit which is independent of its trading. operational and settlement divisions. This independent unit controls the transactions undertaken

by NORD/LB and its employees on a daily basis to ensure that they are in line with market conditions. The Compliance Unit may impose

such trading bans and restrictions as may be necessary to ensure that information. which may affect the prices of securities. is not mis-

used and to prevent confidential information from being disclosed to divisions that are only allowed to use information available to the

general public. To avoid conflicts of interest in connection with the preparation of financial analyses. the analysts of NORD/LB are

obliged to inform the Compliance Unit of any studies being drawn up and must not invest in the financial instruments handled by them.

They are obliged to notify the Compliance Unit of all transactions (including external transactions) undertaken by them for their own

account or for the account or on behalf of third parties. Thus the Compliance Unit is in a position to identify all unauthorized transactions

undertaken by the analysts. such as insider trading and front and parallel running. When a financial analysis involving conflicts of interest

to be disclosed within the NORD/LB Group is drawn up. any information on such conflicts of interest will only be made available by the

Compliance Unit upon completion of the financial analysis. Any subsequent amendment of the relevant financial analysis may only be

made upon consultation with the Compliance Unit and when it has been ensured that the results of the study are not affected by the

knowledge of such conflicts of interest. Further information on these matters is set forth in our Financial Analysis or Conflict of Interest

Policy which is available from the Compliance Unit of NORD/LB upon request.

Time of going to press

20 April 2016 08:35h (CET)

Disclosure of NORD/LB’s potential conflicts of interest according to § 34b Abs. 1 WpHG and

§ 5 FinAnV

None.

Additional disclosures

Sources and price indications

Depending on the issuer. we use information from financial data suppliers. our own estimates. company data and the public media for the

preparation of our financial analyses. Unless otherwise stated in the report. prices indicated relate to the closing price on the previous

day. Fees and commissions apply to securities (buy. sell. hold) and these may reduce the yield on investments.

Analytical methods and updates

In the preparation of financial analyses. we take company-specific methods used for fundamental securities’ analysis. quantita-

tive/statistical methods and models. as well as technical analytical methods as the basis for valuations and for the regular updates. It

should be noted that the results of analyses provide a snapshot overview and that past developments do not constitute a reliable indica-

tor for future profits. The basis of the valuations is subject to unforeseen change at any time. potentially leading to different conclusions.

The present report is prepared on a weekly basis. Recipients are not automatically entitled to receive report update publications.

Recommendation system and history of last 12 months

Positive: Positive expectations for the issuer. a security type or a specific security of an issuer.

Neutral: Neutral expectations for the issuer. a security type or a specific security of an issuer.

Negative: Negative expectations for the issuer. a security type or a specific security of an issuer.

Relative value (RV): Relative value recommendation in comparison to a market segment. an issuer or a maturity.

Issuer / security Date Recommendation Bond type Cause

Documents

Covered Bond & SSA View20 April 2016 Please see important disclosure on the last pages. 2 DK Agenda Page Market overview 2 IPT, Bid-to-Cover and NIP 5 The Canadian covered bond market