Sweden

During the crisis, the Nordic covered bond market firmly established its credentials as an anchor of stability, with spreads holding firm and borrowers maintaining their access to the market. Since then, continued strong demand for exposure to the region has supported a further narrowing of spreads relative to other core European covered bonds. In the EuroWeek/Natixis Nordic covered bond roundtable, a number of leading issuers from the region discussed the underlying reasons for this strength, and the outlook for the market.

A new transparency initiative was unveiled at Thursday’s European Covered Bond Council plenary session in Stockholm. The prospective new standards will dovetail with a separate transparency initiative by the European Central Bank – potentially implying a material funding benefit for those that comply. The initiative is likely to help quell the clamour for cover pool data, raised most recently by credit intensive investors which have conspicuously swelled demand this year – as well as help investors form a view that is independent of credit ratings.

A quartet of 10 year trades was launched this week, with ABN Amro, Crédit Mutuel Arkéa Skandinaviska Enskilda Banken, and Eurohypo all tapping the long end of the curve. While ABN Amro and Crédit Mutuel Arkéa executed successful trades which have since performed well in the secondary market, Germany’s Eurohypo priced just inside Sweden’s SEB on Friday. One syndicate official said the outcome may signal a new chapter for covered bonds.

Dual 10 year deals were launched on Thursday, with Skandinaviska Enskilda Banken and Eurohypo the latest names to answer demand for long dated paper.

The Federal Deposit Insurance Corp’s intransigent position on the US Covered Bond Act 2011 is likely to provoke increasing ire among US banks as they watch wave upon wave of European issuers taking advantage of liquidity in their own backyard. DNB Nor Boligkredit and Swedbank are the latest to take advantage of this rich seam of competitive financing, raising as much as $4bn between them this week.

The stream of Scandinavian borrowers pricing US dollar denominated covered bonds is continuing, as Moody’s assigned a rating to a Nordea’s new programme and Swedbank priced a dual tranche deal. Other Scandinavians are set to follow.

US dollar denominated covered bond issuance is set for growth, as demand is far outpacing supply, regardless of whether a US law is put a law in place, and European issuers are lining up deals for launch. Funding executives from many institutions explained their strategies at the 3rd Euromoney US Covered Bond Investor Forum on Wednesday this week.

Though primary market activity remains muted, the pipeline continues to grow despite headline risk. A string of mandates for US dollar deals are expected, along with a sterling transaction from Barclays.

Swedbank Mortgage Bank on Friday launched a Eu1bn five year deal which had been postponed the previous week. Though this delay probably benefitted the issuer, some players seemed to think this was not the best execution.

Two Swedish transactions appear to have gone smoothly, underscoring in one syndicate banker’s view the “safe haven bid for anything Scandinavian”.

After the flurry of four deals that priced yesterday afternoon (See separate comments), the market has gone into radio silence.

Primary issuance continues to power ahead with five deals pricing yesterday and a further five deals expected to price this afternoon. Several more have been announced but, in a possible sign of things to come, two have been postponed and there is speculation that another is struggling.