Nordics

UBS and Swedbank closed dollar benchmarks this week, pricing their deals well inside where they could have funded in euros. Demand in the dollar market far outstrips supply, and the eager investor base should help draw more borrowers looking to take advantage of the arbitrage.

UBS and Swedbank announced dollar benchmarks on Thursday, opting for the safety and favourable cross currency swap available in that market.

Core and peripheral borrowers are waiting for a better market before bringing benchmark covered bonds. Safe-haven names are traditionally first to take advantage of returning stability. But southern European borrowers, which offer higher yields, juicers spreads and are less flexible over pricing, will find execution easier, said bankers.

Covered bonds should be exempt from the proposed European financial transaction tax, the Association of Danish Mortgage Banks (Realkreditrådet) has said, as it could raise mortgage costs in Denmark and hurt liquidity across bond markets.

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.