Finland

Aktia Bank has a strong liquidity position, good asset quality and solid capital ratios, but as one of Finland’s smaller banks it has a low market share and as such, faces a fiercely competitive environment, said analysts at LBBW research on Friday.

Nordea Finland attracted almost equal interest for both tranches of its 5.25 year and 12 year covered bond that was priced with barely any new issue premium on Tuesday. This symmetry to demand defied convention and illustrated strong comfort in the credit which enabled investors to reach for yield with a high degree of confidence.

The Finnish issuer has mandated leads for a roadshow that starts on March 16.

Nordea’s redemption of its only remaining hard bullet covered bond on January 30 was credit positive because it reduced the risk of a fire sale, Moody’s said on Monday. All the issuer’s outstanding deals are soft-bullet redemptions.

The covered bond market had a watershed moment on Friday when OP Mortgage Bank launched its 10 year. Despite an attractive spread, the deal was unable to get the sort of traction that the issuer may have hoped for. It was no coincidence that as books opened, ECB president, Mario Draghi, raised the prospect of full scale sovereign quantitative easing — something that is likely to make covered bonds look relatively expensive to government bonds.

Credito Emiliano became the second issuer to take advantage of the European Central Bank’s (ECB) buying programme, launching a covered bond on Thursday. The deal led to a repricing of the issuer's curve in a move that could spur other peripheral names to return to the market.

Nordea Finland has issued the first deal from a eurozone bank that is eligible for the European Central Bank’s covered bond purchase programme. Though it was priced at the tightest ever spread for a 10 year deal for a non-German issuer, investors said it offered good relative value.

OP Mortgage Bank returned for the second time this year on Wednesday to issue a €1bn five year covered bond. Though it was the tightest spread for a Finnish transaction seen in the last five years and priced with a negligible new issue premium, it still attracted a robust level of oversubscription.

Credit sentiment is positive, and it seems unlikely that the European Central Bank would take anything other than an accommodative stance at next week’s policy meeting, but bankers are getting cautious that valuations are becoming overstretched, particularly in those markets which have until now been considered safe havens.

On Monday, Aktia Bank launched and priced its second euro covered bond benchmark. Despite some investor concerns over Finland’s relationship with Russia that were encountered during the investor roadshow, the deal exceeded the issuer’s pricing and distribution expectations.

AIB Mortgage Bank has mandated leads for a seven year covered bond to be launched on Wednesday, subject to market conditions. Meanwhile, Aktia Bank has picked leads for a covered bond roadshow starting next week.

Finland’s OP Mortgage Bank returned to the covered bond market on Monday to issue a €1bn seven year benchmark. It paid a relatively small new issue premium, reflecting its long scarcity value, the high quality of its deal, and the deal size.