Norway

Sparebank 1 Boligkreditt printed only the second seven year dollar covered bond since 2007 on Wednesday, pricing 2bp inside where Stadshypotek brought the first in September but with a modest new issue premium. Separately, the issuer explained that its covered bond encumbrance was at the lower end of the Norwegian spectrum.

This week’s trades from Terra Boligkreditt and Landesbank Hessen-Thueringen (Helaba) performed well in the secondary market on Wednesday. However, the lower rated Norwegian deal shone brighter, paying testimony not only to the strength of the jurisdiction and collateral but also to Terra’s exceptional marketing effort.

Terra Boligkreditt has issued its first €1bn covered bond, following extensive marketing. Not surprisingly, given the paucity of euro denominated covered bond supply, there was plenty of demand from a wide range of investors across Europe.

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.

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.

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.

This week’s two covered bond deals have helped increased activity in secondary markets, traders told The Cover. There has been selling pressure in the senior unsecured but this has only translated to more mixed flow in covered bonds.

Sparebank 1 Boligkreditt sold its third covered bond benchmark of the year this week. It has launched trades in euros, dollars, Norwegian kroner, and is monitoring the growing sterling and Australian dollar markets, chief executive Arve Austestad told The Cover.

Sparebank 1 Boligkreditt on Monday returned to the euro market for the first time since January. The rare borrower priced a five 1/2 year benchmark many times cheaper than where it sold a longer trade at the start of the year, exemplifying the sustained tightening in core covered spreads.