Svenska Handelsbanken

A sensible choice of maturity and new issue premium helped Svenska Handelsbanken find strong demand on Monday for its first sterling-denominated senior bond in more than two years.

Financial institutions stretched the appetite of bond investors to breaking point this week, flooding the euro market with nearly €15bn of deals, which struggled to perform in secondary despite carrying large new issue concessions.

Citigroup and Svenska Handelsbanken were both offering senior bonds in euros on Wednesday, as bankers started to question whether the primary market could continue to support large volumes of new issuance.

The total issuance of investment grade corporate bonds in February was an underwhelming €14.8bn but the property sector has outshone all others in 2018 and this week was no different as investors had further diversification to consider.

Finnish residential property developer Kojamo and French care home operator Orpea added to the geographical diversity of the property company corporate bonds sold this week with a €500m seven year deal, while frequent issuer RCI Banque sold a dual tranche offering

Bankers expect further fast growth in Nordic green bond issuance in 2018, including a good chance of sovereign deals, with Sweden a leading candidate.

The sterling covered bond market enjoyed a strong start to the year, with four issuers raising a collective £3.7bn. Barclays priced the first deal of the year, which also happened to be one of the longest and largest.

The Basel III reforms will create a 4% capital shortfall across the banking sector that could be covered in close to three years, according to analysts at UBS.

Subordinated bonds from financial issuers have been back in favour in the Swedish krona market this year, with investors seeking out higher yields compared with other types of credit.

Stadshypotek took advantage of scant covered bond supply — particularly from Sweden in the 10 year area — to issue a tightly priced €500m deal on Tuesday.

Three Swedish banks were busy in the preferred senior market this week, with SBAB Bank and Svenska Handelsbanken pricing new deals and Länsförsäkringar Bank (LF Bank) lining up for its debut.

Swedish property manager Fastighets AB Balder printed the year’s first hybrid bond with speculative grade ratings on Thursday, after investors oversubscribed its €350m offering by 4.5 times.