Nordics

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.

Terra BoligKreditt became the second Norwegian issuer to supply the market this year and the fifth overall to come with a 10 year or longer maturity. The long maturity, despite being more expensive than a five year, will build its curve and should attract new investors.

Norway’s Finance Ministry wants to limit the amount of assets banks can use for covered bond issuance, and could prevent those issuers from taking retail deposits, according to letters published on Wednesday. The ministry of Finance will also consider granting a banking license enabling banks to access central bank funding.

BRFkredit has launched a €4bn Euro-medium term note programme with a view to tempting German investors next year with a first quarter benchmark. Until now the Danish mortgage bank had relied on domestic standalone documentation.

DNB Boligkreditt made a surprise return to the market on Wednesday, after half a year away, issuing a smaller than usual covered bond and taking advantage of the exceptionally strong funding conditions in the long end, where supply is scarce.

Sparebank 1 Boligkreditt printed only the second seven year dollar covered bond since 2007 on Wednesday, pricing 2bp inside where Stadshypotek brought the first in September but with a modest new issue premium. Separately, the issuer explained that its covered bond encumbrance was at the lower end of the Norwegian spectrum.

Fitch has downgraded the covered bonds Realkredit Danmark uses to fund adjustable rate mortgage loans, just weeks before the Danish auctions begin. Meanwhile, European covered bond downgrades have increased sharply, Moody’s reported.

This week’s trades from Terra Boligkreditt and Landesbank Hessen-Thueringen (Helaba) performed well in the secondary market on Wednesday. However, the lower rated Norwegian deal shone brighter, paying testimony not only to the strength of the jurisdiction and collateral but also to Terra’s exceptional marketing effort.

Terra Boligkreditt has issued its first €1bn covered bond, following extensive marketing. Not surprisingly, given the paucity of euro denominated covered bond supply, there was plenty of demand from a wide range of investors across Europe.

Fixed rate mortgages are outpacing adjustable rate lending in Denmark for the first time since 2008, according to the Association of Danish Mortgage Banks. But analysts still expect one year adjustable rate bonds to dominate the December auctions.

Norway’s Terra Boligkreditt began a week long roadshow on Monday, ahead of what could be its first ever jumbo covered bond. But the prospect of a limit on Norwegian covered bond issuance should prompt questions from investors.