Denmark

Spread guidance on new issues launched this (Wednesday) morning was wider than levels heard yesterday, but with re-offers ultimately fixed at the tight end of guidance, syndicate bankers were speaking of a good day for covered bonds. Meanwhile, Spanish supply emerged in the form of two taps.

Stadshypotek and Société Générale today (Tuesday) announced mandates for benchmark covered bonds that market participants said are likely to be launched tomorrow (Wednesday). At least one other issuer is said to be planning to access the market, despite a short working week and reduced investor availability due to the Easter holidays.

Nykredit is today (Tuesday) nine days into an auction of Danish covered bonds and mortgage bonds that lasts until Thursday and is intended to reduce the volume of bonds that are refinanced during the country’s traditional end-of-year auctions. Ten times more is being auctioned than last March.

The Danish government is planning to amend the country’s covered bond framework to rectify an imbalance that has been in place since new legislation was introduced in 2007, but market participants have played down the impact of the change.

Standard & Poor’s on 30 December changed its outlook on Nykredit Realkredit’s A+ rating from stable to negative because of pressures on its banking operations, but said that the asset quality of the group’s core lending business remained resilient.

Denmark’s mortgage banks have sold a record volume of mortgage bonds during the country’s traditional end-of-year auctions that are held to refinance variable rate mortgages. But very high bid-to-cover ratios suggest the large supply was easily absorbed.

Danmarks Nationalbank will accept junior covered bonds as collateral for credit on a permanent basis from February 2010, the central bank has announced.

Moody’s yesterday (Monday) downgraded Nykredit Realkredit’s junior covered bonds from Aa2 to Aa3, concluding a review for possible downgrade initiated on 11 September.

Denmark’s mortgage banks will be auctioning around Dkr550bn (Eu73bn) of covered bonds over the course of the industry’s annual December auctions, almost twice the amount sold through the auctions last year. But demand is “huge”, said one analyst familiar with the auctions.

Danske Bank took advantage of limited long dated supply and what a spokesperson for the bank said was an unusual position among Nordic issuers to launch the first 10 year euro benchmark from the region yesterday (Wednesday), a Eu1.25bn issue.

Danske Bank is pricing the longest dated euro benchmark from the Nordic region at the tight end of guidance this (Wednesday) afternoon after the transaction met with a strong reception.

Moody’s yesterday (Thursday) downgraded DLR Kredit’s issuer rating from A1 to A3 under the rating agency’s new methodology for rating financial institutions that specialise in issuing covered bonds on behalf of an owner bank or a group of banks.