Denmark

Covered bonds made a comeback in the Swiss franc market this week, as investors reached for a highly rated asset class that, unlike other triple-A product, still offers a spread above mid-swaps.

In this roundtable discussion, sponsored by Danske Bank and Nykredit, leading market participants – including issuers, investors and the Danish central bank – examine how Denmark has coped through the crisis and what the future holds for the country’s covered bond market.

Moody’s on Friday placed BRKkredit’s covered bonds and Nykredit Realkredit’s junior covered bonds on review for downgrade.

Moody’s yesterday (Tuesday) downgraded several Scandinavian financial institutions that either issue covered bonds or are closely linked to issuers, concluding reviews for possible downgrade that were initiated on 22 July.

Moody’s yesterday (Wednesday) placed on review for possible downgrade the long term ratings of several Nordic covered bond issuers.

Danish mortgage banks’ tradition of holding auctions once a year in December to refinance covered bonds that fund one year adjustable rate mortgages is facing changes.

Danske Bank is set to price its third euro benchmark covered bond and its first since June 2008 this (Wednesday) afternoon at the tight end of guidance.

Swedbank Mortgage will this (Friday) afternoon price the first Swedish jumbo since the European Central Bank’s announcement three weeks ago, a Eu1.25bn five year mortgage-backed benchmark. And a further issue from non-euro Scandinavia could be on the horizon.

Nykredit on Monday introduced two-tier mortgage lending to finance commercial properties in a bid to avoid the potential costs associated with issuing junior covered bonds. The new approach involves the re-emergence of traditional mortgage bonds, issuance of which had fallen significantly after January 2008, when the Capital Requirements Directive (CRD) came into effect.

The US should look to the Danish mortgage bond system for lessons on how to operate a stable and functioning market, suggested panellists on a forum hosted by Nykredit at the Euromoney Bond Investors Congress on Tuesday.

Moody’s on Friday concluded a review for possible downgrade of Danske Bank’s rating by cutting the bank by two notches from Aa1 to Aa3, with a stable outlook.

Fitch and Standard & Poor's have downgraded Danske Bank, citing the economic downturn in many of the countries in which the Denmark-based bank operates.