Norway

Sweden’s Stadshypotek took the year’s total for dollar covered bond issuance past $10bn this week with a $1.25bn five year deal. Nordic issuers’ spreads are closing in on those of their Canadian peers and dollar covered bonds from many countries have become expensive compared to Treasuries, said Barclays analysts.

Norway’s central bank plans to continue excluding covered bond mortgage subsidiaries from using its lending facility and says the level of asset encumbrance should be linked to the cost of deposit insurance. Analysts said that the news was disappointing for the covered bond market.

Sparebank 1 Boligkreditt has returned to the dollar market for its fifth benchmark deal since 2010. It attracted a much broader span of interest than its previous deals, with strong demand from Asia.

Net euro denominated covered bond supply has dropped to the lowest level since the euro begun. And with a surfeit of central bank liquidity alongside continued balance sheet shrinkage, this trend looks set to continue, suggesting that the already measly supply forecasts for the year could be revised lower.

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.

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.

Excellent funding conditions drew more covered bond issuers from core Europe to the market this week, with impressive deals done at aggressive spread levels. But bankers cautioned that new issue premiums may have to rise with juicy spreads from peripheral Europe drawing investors’ gaze.

Terra BoligKreditt became the second Norwegian issuer to supply the market this year and the fifth overall to come with a 10 year or longer maturity. The long maturity, despite being more expensive than a five year, will build its curve and should attract new investors.

Norway’s Finance Ministry wants to limit the amount of assets banks can use for covered bond issuance, and could prevent those issuers from taking retail deposits, according to letters published on Wednesday. The ministry of Finance will also consider granting a banking license enabling banks to access central bank funding.

DNB Boligkreditt made a surprise return to the market on Wednesday, after half a year away, issuing a smaller than usual covered bond and taking advantage of the exceptionally strong funding conditions in the long end, where supply is scarce.