Sweden

Moody's has given a triple-A rating to the Norwegian mortgage covered bonds issued by Sweden’s Skandiabanken, which has an A3 issuer credit rating.

Sweden’s central bank highlighted the refinancing risk between the duration of assets and covered bond liabilities in a financial stability report this week. It is also concerned about the high proportion of bonds that banks are holding for liquidity purposes. Analysts welcomed the report and the bank’s pre-emptive and prudent approach.

Landshypotek closed books on its second largest Swedish krona covered bond ever on Tuesday, with leads expected to price Skr4.1bn (€471.8m) of five year fixed and floating rate paper later on Tuesday afternoon.

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.

Despite a UK holiday syndicate bankers are not ruling out deals on Monday, and there are still borrowers eager to execute bonds in run up to summer, they said.

Länsförsäkringar Hypotek (LF Hyp) plans to issue smaller, but more, regular covered bond deals. Speaking to The Cover on Tuesday, vice executive president and head of treasury, Martin Rydin, said that due to growth in deposits and senior unsecured funding, covered bond funding will account for a smaller proportion of the bank’s overall need.

Sweden’s Länsförsäkringar Hypotek returned to covered bonds on Monday, after almost two years away from the market. Its rarity and top quality collateral ensured conclusive investor endorsement, despite competing Spanish supply.

Swedbank Hypotek wasted little time in moving from blackout to benchmark this week, and launched its first euro jumbo covered bond since 2011 on Thursday. Other Nordics are emerging from reporting periods and at least one also has an eye on a euro transaction, said bankers.

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.

UBS and Swedbank closed dollar benchmarks this week, pricing their deals well inside where they could have funded in euros. Demand in the dollar market far outstrips supply, and the eager investor base should help draw more borrowers looking to take advantage of the arbitrage.

UBS and Swedbank announced dollar benchmarks on Thursday, opting for the safety and favourable cross currency swap available in that market.

Core and peripheral borrowers are waiting for a better market before bringing benchmark covered bonds. Safe-haven names are traditionally first to take advantage of returning stability. But southern European borrowers, which offer higher yields, juicers spreads and are less flexible over pricing, will find execution easier, said bankers.