Sweden

Skandinaviska Enskilda Banken AB (SEB) has mandated leads for its first covered bond since October 2013 and the third only Swedish deal to be issued this year. The deal is likely to offer three times the coupon of the previous Swedish covered bond.

Swedbank returned to covered bonds for its third funding exercise on Wednesday but decided against issuing off its 144A programme to launch in Reg S format for its first dollar benchmark of the year. The decision came as euro rates markets suffered a further bout of intraday volatility following last week’s extraordinary instability. And as Caffil tapped its 35s.

Draft Swedish regulation, requiring compulsory repayment of mortgage loans until the loan to value ratio gets below 50%, has been dropped. However, lending practices had already become stricter, so dropping the requirement changes little, said LBBW research on Thursday.

Länsförsäkringar Hypotek priced a €500m no-grow seven year covered bond with a roughly 2bp new issue premium on Thursday. This was the second covered bond not eligible for the European Central Bank’s purchase programme (CBPP3) issued this week following a deal from Abbey. The spread pick-up relative to CBPP3 eligible deals attracted a decent book and the maturity played to asset managers and central banks alike.

A pickup in primary market activity continued apace on Wednesday when Stadshypotek sold the sixth dollar denominated covered bond in the US this year.

Swedbank became the seventh issuer to price a sterling three year covered bond FRN this year, launching a £500m deal on Wednesday. This is the third transaction from an overseas covered bond issuer in sterling and shows the attractiveness of the basis swap, particularly after the surprise reate cut in Sweden.

The Swedish FSA’s proposals, requiring borrowers to pay down their mortgages to a loan to value of 50%, is credit positive for covered bonds, said analysts at Danske Bank research on Friday. The proposals, which were published on Wednesday, should lead to a decline in household indebtedness and should dampen house prices.

Swedbank and HSBC both issued €1bn euro-denominated seven year covered bonds on Wednesday. The slim pricing differential between the two transactions neatly illustrated that covered bonds not eligible for the European Central Bank’s purchasing programme have caught up with those that are.

Swedbank is expected to open books for a benchmark seven year covered bond on Wednesday having mandated joint leads BNP Paribas, Danske Bank, LBBW, Swedbank and UBS on Tuesday.

The Swedish regulator’s proposal to lower the covered bond swap counterparty rating threshold to single A from double A is credit positive, said Moody’s on Monday. Though at odds with overall European covered bond rules in the Capital Requirements Regulation and Directive, the proposal would allow banks to continue receive preferential regulatory treatment on their covered bond investments.

The European Central Bank's covered bond purchase programme (CBPP3) turned relative value upside down this week, with a French deal pricing inside a similar Swedish offering, among a crop of four new issues.

Stadshypotek came to screens late on Monday morning to price the first Swedish covered bond after the opening of the European Central Bank’s third covered bond purchase programme. Although the central bank would not target Stadshypotek’s paper specifically as Sweden is not in the euro area, the programme has tightened spreads across the market.