Nordics

The new Danish covered bond law, which comes into effect on April 1, is a more complicated structure where a maturity extension is possible under limited circumstances. Because the new bonds carry a higher risk compared to the existing legacy bonds, issuers looking to sell bonds face increased execution risk. The Cover spoke to various buy and sell-side market participants to gauge their thoughts.

Covered bonds are finishing the week tighter with demand spurred after Bunds softened, allowing investors to hit absolute yield targets. Traders reported investors looking to extend maturities, though selective sales of long-dated Norwegian bonds have raised speculation of primary activity next week. Core to peripheral convergence is still broadly evident especially in Ireland, but signs of fatigue have become evident in long dated multi-Cédulas and selective short-dated single name Cédulas.

Swedish lenders should set a 70% loan to value cap for interest only mortgages and loans higher than that should be on a repayment plan, the Swedish Bankers’ Association said on Wednesday. Investors welcomed the news but said it would have a marginal effect. The Riskbank's governor, Stefan Ingves, said on Wednesday that mortgage risk weights should rise.

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.

A Danish covered bond legal amendment, expected to come into force on April 1, is credit positive for Danish mortgage banks, Moody’s said on Monday.

Länsförsäkringar Hypotek (LF Hyp) issued Sweden’s first covered bond deal of the year on Tuesday, having identified solid excess demand in Monday’s deal from Finland’s OP Mortgage Bank. The euro funding was cheaper than what the borrower could have achieved in Swedish kronor.

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.

Eika Boligkreditt opened books on Wednesday for a €500m seven year covered bond that offered a spread not seen from Norway since January 2013, and one of the largest pick-ups from a core European issuer this year. But with a new issue premium of just 2bp, the funding was cheap for the borrower.

The build up to Íslandsbanki’s annual Thorrablot celebrations — for the uninitiated, it’s an Icelandic midwinter festival — is always fraught with nerves, anticipation and a slightly sickly feeling at the prospect of crunching down on goats’ testicles. But this year’s shindig on Thursday night has some added spice — or, more appropriately, pickle — as it could be the last event ever.

Norway’s Vardia Insurance Group on Thursday announced its plans to float on the Oslo Stock Exchange next month.

Eika Boligkreditt, formerly Terra Boligkreditt, has named leads for a deal roadshow and Deutsche Kreditbank has named lead for a euro benchmark, while two more covered bond deals could yet be mandated later on Monday for issuance on Tuesday.

Denmark’s efforts to improve its covered bond law and reduce refinancing risk for its banks is a step in the right direction, Standard & Poor’s said on Wednesday. However, refinancing risk will continue to be a problem.