Nordics

The Federal Deposit Insurance Corp’s intransigent position on the US Covered Bond Act 2011 is likely to provoke increasing ire among US banks as they watch wave upon wave of European issuers taking advantage of liquidity in their own backyard. DNB Nor Boligkredit and Swedbank are the latest to take advantage of this rich seam of competitive financing, raising as much as $4bn between them this week.

Finland’s OP Mortgage Bank has closed books on the second Finnish covered bond of 2011, a Eu1bn five year benchmark deal, on Wednesday.

The stream of Scandinavian borrowers pricing US dollar denominated covered bonds is continuing, as Moody’s assigned a rating to a Nordea’s new programme and Swedbank priced a dual tranche deal. Other Scandinavians are set to follow.

US dollar denominated covered bond issuance is set for growth, as demand is far outpacing supply, regardless of whether a US law is put a law in place, and European issuers are lining up deals for launch. Funding executives from many institutions explained their strategies at the 3rd Euromoney US Covered Bond Investor Forum on Wednesday this week.

Though primary market activity remains muted, the pipeline continues to grow despite headline risk. A string of mandates for US dollar deals are expected, along with a sterling transaction from Barclays.

Recent hawkish comment’s from the ECB president Jean Claude Trichet have helped to boost demand in the Danish covered bond auctions, which entered their second day today.

Danske Bank opened and closed books in quick succession on Wednesday for the inaugural deal off its cover pool C programme which mixes both commercial and residential mortgages.

Sparebanken Vest Boligkreditt launched its second publically sold covered bond yesterday (Monday). In contrast to France there was no obvious new issue premium, and given its small size and the rarity of Norwegian issuance, the deal was always likely to be an easy sell.

After good buying in the long end of the French curve at the end of last week, spurred by the back-up in yields, secondary market activity has slowed markedly and the focus is once again back on the primary where there are several deals are in play. The Italian market is taking centre stage amid concerns that one issuer might crowd out the other.

Swedbank Mortgage Bank on Friday launched a Eu1bn five year deal which had been postponed the previous week. Though this delay probably benefitted the issuer, some players seemed to think this was not the best execution.

Two Swedish transactions appear to have gone smoothly, underscoring in one syndicate banker’s view the “safe haven bid for anything Scandinavian”.

After the flurry of four deals that priced yesterday afternoon (See separate comments), the market has gone into radio silence.