Nordic banks tighten the screws
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Nordic banks tighten the screws

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Nordic banks have had a great start to 2024 in the bond market, compressing their unsecured spreads to well below where they could fund in previous years. Despite these rich levels, investors have shown no reticence when it comes to placing orders, reports Frank Jackman

Nordic banks tightened the spreads they had to pay on senior unsecured new bond issues over the first six months of 2024, from an average of 127bp for fixed rate euro funding in the fourth quarter last year to an average of 77bp in the last, data from GlobalCapital’s Primary Market Monitor show.

Finnish banks have been the tightest senior funders in euros so far this year, with trades coming at 76.5bp to mid-swaps on average, narrowly beating Norway’s 77.2bp. Swedish borrowers have paid 88bp to fund on average, while Danish firms — the most prolific of the year so far — have offered 115bp. Danish and Swedish deals have tightened the most on average since last year, down some 34bp and 26bp, respectively.

But some names have managed to move the needle even further. Nordea, for example, was able to print a €1bn 3.375% June 2029 senior preferred deal at 48bp over mid-swaps in early June — less than half the 110bp spread it needed to seal a €1bn 4.125% May 2028 senior non-preferred print in early May last year.

The move tighter is also pronounced further down the capital stack. Nordea issued a €750m 4.125% May 2035 non-call May 2030 green tier two deal at 135bp over mid-swaps in late May this year, some 50bp inside where it had issued a €500m 4.875% February 2034 non-call February 2029 deal last November. Despite the tighter spread, the larger, later deal attracted almost €1bn more demand, with the book closing at €3bn.

Of course, Nordea has some way to go before it matches the 92bp level it was able to achieve on a €1bn 0.625% August 2031 non-call August 2026 tier two in May 2021.

Despite these tight spreads, issuers are not having to pay big new issue premiums.

Average new issue premium for fixed rate senior unsecured bonds

2023 H1 2024

Source: GlobalCapital's Primary Market Monitor

Falling premiums

NIPs have fallen for Nordic senior unsecured funders across the board this year, and banks have looked to make the most of a buoyant market. Last year, Swedish banks needed on average 11.1bp of concession to seal a deal, but this year these funders have managed to come on average 0.75bp through the curve.

Svenska Handelsbanken was able to add duration in February without paying up to do so, for instance. The Swedish firm issued a €750m February 2034 deal at 110bp over mid-swaps, 5bp through its secondary curve. Not only is this one of the smallest concessions of the year so far across the Nordic region, but it was also the first 10 year unsecured senior print from a Nordic bank in almost three years, PMM data shows.

Senior unsecured funders in the Nordic region were forced to tap the short end of the curve by the fallout following the collapse of Credit Suisse, which shut the market down for several weeks during the second quarter of 2023. The average tenor fell slightly from 4.98 years before Credit Suisse’s collapse to 4.82 years throughout the rest of 2023, as issuers pushed to fund around the five year mark. Only two issuers — Danske and Swedbank — priced seven year trades in the latter part of last year, with both paying 15bp of concession to do so.

But 2024 started strongly as a renewal in risk sentiment and talk of rates cuts sent investors further out along the curve. The average tenor so far this year has been just shy of six years, 5.98 years, with two banks — the aforementioned Svenska Handelsbanken and Nordea — finding success at 10 years.

Nordic banks have not had to worry about investors shying away as spreads and new issue premiums compress. The average bid to cover ratio for Nordic benchmark prints has remained stable at 2.1 times in the first half of 2024, up slightly from last year’s 1.9 times. However, despite the strong conditions, deal sizes are down slightly on average, falling from €809m in 2023 to €615m so far this year, GlobalCapital data show.

Average Nordic euro senior unsecured new issue spread over mid-swaps

Source: GlobalCapital's Primary Market Monitor

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