Denmark

Bayerische Landesbank (Bayern LB) launched its first euro benchmark covered bond in over a year on Wednesday, bringing a 10 year public sector backed Pfandbrief originally mandated in July 2011. The trade prioritised pricing over size and received less interest than recent German deals. At the less traditional end of the covered spectrum, Nykredit Realkredit opened books on a tap of a recently issued junior covered bond.

The senior market took centre stage again on Tuesday, dissuading covered issuers from competing with another trio of unsecured trades after Westpac’s slow bookbuild on Monday. The Australian issuer closed the spread gap with its Nordic peers, but found demand lacklustre compared with earlier Australian benchmarks.

Swedish banks head a group of possible covered bond issuers, despite resurgent volatility. The Swedes have largely stayed away from the euro market so far this year, opting instead to rely on domestic demand. But analysts still expect the need for diversification and name recognition among Swedish banks to yield euro benchmarks.

Nykredit Realkredit will price a €500m five year junior covered bond at 200bp on Wednesday afternoon. The deal came far closer to senior than covered bond levels, with demand mainly from credit buyers in Nordic regions more familiar with the unusual structure.

Borrowers could decide to switch senior projects into covered trades, syndicate bankers told The Cover. This would follow the example Nordea set in April when it turned a planned senior deal into a blow out seven year covered deal.

Nykredit Realkredit on Tuesday finished a roadshow for its first euro benchmark junior covered bond since 2010. Some continental buyers are unfamiliar with the structure, and past deals have been priced far closer to senior than covered levels. However, Denmark’s largest mortgage lender rarely issues in euros, and a high spread and lack of alternative investment opportunities could draw a healthy mix of credit and rates buyers.

Nordea Kredit Realkreditaktieselskab (Nordea Kredit) announced an auction of three year Danish covered bonds on Thursday, a day after the Nordea Group’s Finnish arm launched its second jumbo covered bond of 2012.

Denmark’s Nykredit Realkredit will launch a new mortgage funding model this quarter, in an attempt to lower its covered bond issuance costs in an environment of falling house prices.

The European covered bond market is stabilising on Friday, with buyers reported in French and Scandinavian names. But the Spanish market remains shaky, and though selective bids returned the macro sovereign backdrop deteriorated after Thursday's brief impovement.

Danske Bank sold a Skr3bn (€340m) five year deal at 115bp over mid-swaps on Thursday, its first benchmark trade in the currency.

Realkredit Danmark began its March auctions on Monday, offering one year bonds in Danish kroner and euros. The borrower is optimistic after strong auction results from other Danish banks in recent weeks, and reported yields of below 1% from its first day of sales.

The performance of cover pools has deteriorated, Crédit Agricole research has found after examining Moody’s, Standard & Poor’s and Fitch’s data. But this is not because of worsening credit risk but rather because of market risk.