Norway

Eika Boligkreditt, formerly Terra Boligkreditt, has named leads for a deal roadshow and Deutsche Kreditbank has named lead for a euro benchmark, while two more covered bond deals could yet be mandated later on Monday for issuance on Tuesday.

Nordea Finland and Sparebanken Vest Boligkreditt achieved the best results among the slate of deals that were issued by core covered bond issuers this week. Both transactions attracted among the highest level of over subscription, despite pricing at the tightest spreads.

Thursday’s suite of covered bond issues from Australia and Switzerland underscored a growing impression among bankers that pricing core transactions is taking more forethought and effort. Whereas deals were invariably easy to price last year, demand seems to have become more finite. Books are taking longer to build as investors need more cajoling to meet issuers’ funding targets, in stark contrast to peripheral credits.

The European Commission must ignore the counsel of the European Banking Authority, which has called for covered bonds to remain as level 2A assets within Basel III’s Liquidity Coverage Ratio. It must instead base its decision, due by June 30, on the EBA’s analysis that covered bonds are as liquid as sovereign bonds and good enough for Level 1 of the LCR.

There is an even chance that two deals could surface from Europe’s core and periphery next week, bankers said on Friday, but potential issuers have been perturbed by the performance of this week’s two deals, both of which have softened slightly. However, in both cases there were specific factors at work that are unlikely to impinge on prospective deals where there is high confidence of a strong reception.

Sparebank 1 Boligkreditt struggled to get investor traction on Tuesday morning for its €1bn long six year benchmark. The weak demand was in sharp contrast to last week’s €1.5bn five year bond from DNB Boligkreditt, with bankers away from the deal suggesting the long six year maturity may have been slightly too long for asset managers looking to shorten duration.

After a spate of seven year deals from Scandinavian banks, Norway’s DNB Boligkreditt was set to price a €1.5bn five year on Tuesday. This will sit well with investors’ year-end liquidity constraints, said bankers.

The new Norwegian government’s pre-election pledge to ease mortgage lending standards would be credit negative, Moody’s said on Monday. Norwegian households are already highly indebted, house prices are overvalued and inflating the credit bubble further could result in a failure to repay high LTV mortgage loans under stressed market conditions, it said.

Norway’s banks will not be hit by the finance ministry’s latest changes to balance sheets rules that affect mortgages, as they already operate on a stricter footing, a local banker told The Cover on Tuesday. From next January the loss given default floor for mortgage assets on Norwegian bank balance sheets will double, the finance ministry announced on Sunday.

Sparebanken Vest Boligkreditt (SVB) returned to the covered bond market on Wednesday, after more than 18 months away, issuing a no grow €500m five year that was priced flat to its outstanding curve.

Cover pool encumbrance was steady last year versus the previous year, Fitch said on Thursday. The most stable levels were among the most encumbered institutions, where covered bonds have made up a large share of their financing for a long time.

Sparebank 1 Boligkreditt opened books for a seven-year €1 billion covered bond backed by prime Norwegian residential mortgages on Tuesday. The deal attracted a granular, but not hugely oversubscribed book, after pricing with a small new issue premium in a busy market.