Nordics

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.

Covered bonds may have caused a growth in mortgage lending and an increase in house prices that now pose a threat to the stability of the Norwegian financial sector, the country’s financial regulator said on Tuesday. To address the risk from the rise of secured funding, Norway’s Financial Supervisory Authority is debating whether to follow other jurisdictions and impose limits on covered bond issuance.

Core covered bonds are performing poorly, with low coupons putting investors off, according to Deutsche Bank analysts. Higher yielding peripheral paper could benefit as a result, but the prospect for fresh benchmark trades from southern Europe remains uncertain.

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.