Nordics

DNB Boligkreditt issued its first dollar benchmark since 2011, pricing a $2bn deal on Thursday evening in the US. The bond, which was increased from $1.5bn, proved a huge success in terms of investor diversification, granularity of orders and the funding level.

DNB Boligkreditt began marketing a five year dollar covered bond on Thursday, its first benchmark in the currency in two years.

Stadshypotek’s jumbo transaction this week offers several lessons for the market and provides a clear indication of investor sentiment, as well as potential pitfalls on strategy and spread that core issuers would do well to avoid.

Sweden’s Stadshypotek ended a long absence from the euro covered bond market on Tuesday morning, approaching investors with a single digit spread for a new 5.25 year deal. But competing supply from other issuers and asset classes with more attractive starting spreads slowed demand, and the borrower was forced to revise guidance sharply upwards.

Norway’s banks should be monitored case-by-case on mortgage transfers to covered bond issuers, the country’s regulator has said. Bankers had feared it could impose a hard cap across the whole industry.

Norway’s central bank on Monday announced its latest offer to terminate early the covered bond swap arrangements it has with Norwegian banks, allowing them to free up covered bond collateral and help support primary issuance, said bankers.

After being absent from the euro covered bond market for nearly two years, Danske Bank made a surprise return on Thursday, mandating leads and opening books for a €1bn seven year deal priced at the tight end of guidance.

SEB was tempted into a surprise return to the euro covered bond market by the best relative funding levels versus its domestic market for some time, its head of treasury management told The Cover on Tuesday. John-Arne Wang said SEB saw a chance to grab tighter funding on Monday, thanks to a three week drought in the euro primary market.

Bayerische Landesbank followed Stadshypotek on Wednesday morning by issuing a £200m sterling FRN, which provided it with slightly cheaper funding to euros — a market in which issuance has fallen to half of what it was at this point in 2012.

Stadshypotek’s inaugural sterling covered bond not only achieved great investor diversification, but also provided exceptionally cheap funding, sending a strong message to other foreign issuers who may be looking for something similar.

Sweden’s Stadshypotek gave the primary covered bond market a surprise injection of liquidity on Monday morning when it opened books for its first sterling deal. In contrast to many covered bond issuers, it has diversified across a wide range of currencies in the last two years so the addition of a sterling deal was a natural progression.

Excellent funding conditions drew more covered bond issuers from core Europe to the market this week, with impressive deals done at aggressive spread levels. But bankers cautioned that new issue premiums may have to rise with juicy spreads from peripheral Europe drawing investors’ gaze.