Sweden

The Swedish government on Monday announced a rescue package for the country’s financial system, which includes a bank debt guarantee scheme, a stabilisation fund to manage potential solvency problems, and equity injections. However, in contrast to most other European rescue plans, new covered bonds issues are explicitly included in the Swedish guarantee.

EuroWeek, in partnership with UniCredit, recently held a Nordic roundtable where major issuers discussed their experiences during the past year and how they have coped during the crisis.

Riksbank, the Swedish central bank, has responded to the market turmoil by increasing the amount of covered bonds from a counterparty or an institution with “close links” to it that can be used as collateral in the RIX payment system, it announced today (Monday).

In brief: Pfandbriefbank schweizerischer Hypothekarinstitute found demand focused at the short end when it came to market with a Sfr340m dual tranche bond this week.

Sparebank 1 Boligkreditt and the Swedish Covered Bond Corp showed the new realities of the covered bond market this week, taking spreads to new wides to win over investors. The Cover spoke to officials at the two institutions about the thinking behind their new issues.

A Eu1.25bn two year deal for Swedish Covered Bond Corp this (Thursday) morning priced 18bp wider than comparable issuance just two weeks ago signalled the repricing of the covered bond market. But while some issuers and investors were rueing the leap in spreads, many bankers were welcoming the new realism being adopted by this week’s borrowers, also including CIBC, Sparebank 1 and possibly an Italian before the week is out.

Issuers could this week see any plans for issuance frustrated by competition within the covered bond market and also from the senior unsecured market, with spreads coming under pressure from both quarters. However, that is not stopping a wide array of names seeking out the smallest opening and this week has already seen more supply attempted in the same buckets as last week.

Swedbank has closed books on its Eu1bn two year issue and priced the mortgage backed deal at 22bp over mid-swaps, the middle of guidance, bringing to a successful conclusion an exercise that had several hurdles to overcome along the way.

Swedbank opened books on a two year mortgage backed benchmark this (Thursday) morning some 5bp back from where some accounts were sounded out earlier this week, suggesting that the issuer was suffering from launching a deal in almost direct competition with Skandinaviska Enskilda Banken, which priced its Eu1bn three year mortgage backed deal yesterday (Wednesday) afternoon.

Skandinaviska Enskilda Banken closed books on the first post-holiday benchmark this (Wednesday) morning, but its execution gave little cause for celebration. The potential for competing issuers’ plans to clash in what is expected to be a busy period has also been made clear, with negative implications for spreads.

Skandinaviska Enskilda Banken AB has mandated Deutsche Bank, Goldman Sachs, SEB and UBS to launch a new mortgage backed benchmark in the coming weeks once the holiday season has drawn to a close.