Denmark

A 10 day auction by Denmark’s Nykredit to refinance adjustable rate mortgages resulted in the sale of Dkr44.3bn (Eu5.95bn) covered bonds and historically low interest rates for retail borrowers, according to the mortgage bank.

Denmark’s Nykredit will tomorrow (Friday) begin a September round of auctions to refinance adjustable rate covered bonds maturing in October, and although volumes are higher than in previous years the supply is expected to be well absorbed.

Denmark’s adjustable rate mortgage market has won a stay of execution as a result of the Basel Committee delaying full implementation of the Net Stable Funding Ratio until 2018, and the committee’s willingness to change its position on matched funding of liabilities of less than one year.

Standard & Poor’s has affirmed at AAA mortgage-backed covered bonds issued from Danske Bank’s domestic cover pool and removed them from negative review following the application of its revised rating criteria.

Danske Bank yesterday (Wednesday) sold the first Nordic 12 year benchmark covered bond after heeding investor calls for a long maturity, a syndicate official at Danske told The Cover.

New covered bonds launched by Danske Bank, Lloyds TSB and SpareBank 1 Boligkreditt met with modest demand today (Wednesday), although syndicate bankers highlighted high quality order books and sub-Eu1bn issue sizes in longer maturities as respectable achievements.

Five new Eu500m plus covered bonds were announced in the past 24 hours after yesterday (Monday) morning’s two, despite market conditions proving worse than last week, when 12 hit the market. The deals announced today (Tuesday) are set to take euro jumbo issuance this year past Eu100bn.

The Association of Danish Mortgage Banks is exploring the possibility of specialist mortgage banks being allowed to meet the Capital Requirements Directive’s requirement for continuous loan-to-value (LTV) compliance by providing guarantees for the portions of loans that exceed relevant LTV limits, a measure that is currently only available to the country’s universal banks.

Denmark’s mortgage banks, central bank and financial supervisory authority have said that new liquidity rules proposed by the Basel Committee on Banking Supervision and the European Commission pose a serious threat to the Danish mortgage credit system and wider economy and would destroy the country’s model of adjustable rate mortgage (ARM) lending.

Standard & Poor’s removed 10 covered bond programmes from review after affirming their ratings at AAA on Friday, but downgraded five programmes and these remain on review. The actions were taken on the last day of a four month period by the end of which S&P said it aimed to have resolved all 98 ratings it placed on review in December after introducing a new methodology.

With more than Eu4bn of benchmark issuance priced yesterday (Wednesday), there were no signs of the covered bond market slowing down after a record first quarter. And pricing at the tight end of guidance for three new benchmarks showed spreads holding up under the heavy supply.