Nordics

Sweden’s financial regulators are concerned at how much encumbrance is on banks’ balance sheets. The country’s borrowers are among the most encumbered in Europe, and despite efforts to increase deposits new covered legislation could make the situation worse.

Terra Boligkreditt has mandated for its third covered bond benchmark of 2012. Strong collateral growth and larger funding needs mean it could launch its first ever jumbo trade later this month, said syndicate leads.

With peripheral concern resurgent, covered bond investors are looking for safety. But having grown tired of exceptionally tight core levels they are also in search of spread. Nordic issuers are best placed to offer them both and should be taking advantage of the primary while they can, said syndicate bankers.

Stadshypotek pushed the dollar covered bond curve out to seven years this week, pricing the longest covered bond benchmark in the currency since 2007.

Sweden’s Stadshypotek priced a A$750m inaugural transaction on Friday, paying only a small premium over where it would have funded in the domestic market.

Sampo Housing Loan Bank brought its first benchmark covered bond in almost a year on Thursday, pricing a successful €1bn no-grow jumbo trade.

Sweden’s Stadshypotek on Thursday became only the fourth issuer to launch a benchmark Kangaroo covered bond. Despite an explosion of domestic supply this year the global appetite for Australian dollars remains strong, which bodes well for other Nordic issuers looking at inaugural trades.

Sampo Housing Loan Bank on Wednesday mandated for the sixth seven year covered bond benchmark of September, and should price the trade on Thursday. Despite a renewed appetite for risk in the wider market, covered bond supply remains consigned to safer names, but a successful auction for the Spanish sovereign could pave the way for further Cédulas.

Deutsche Bank brought the covered bond market to the brink of sub-Euribor pricing on Friday, issuing a €750m eight year mortgage Pfandbrief just a single basis point above mid-swaps. With the secondary squeeze grinding onwards syndicate bankers said it was only a matter of time until the Euribor barrier was broken.

Danish mortgage lenders will benefit from a new best practices aimed at limiting the sale of variable rate and interest only mortgages, said Moody’s on Thursday. The rating agency report came as yields on Nykredit’s one year adjustable rate bonds hit fresh lows, making short dated variable rate mortgages even more attractive.

Nykredit Realkredit kicked off the Danish auction season on Wednesday, selling one and three bonds with lower absolute yields than ever before. One year bonds will dominate the auctions, though mortgage lenders are trying hard to push borrowers towards longer dated loans, to smooth out maturity profiles ahead of Basel III.

This week’s two covered bond deals have helped increased activity in secondary markets, traders told The Cover. There has been selling pressure in the senior unsecured but this has only translated to more mixed flow in covered bonds.