Sweden

Swedish issuers have told The Cover that it is unlikely they will be making use of the government guarantees available to them for covered bonds. While the costs of such issuance may be interesting relative to guaranteed senior unsecured issuance, other considerations work against it.

The Swedish National Debt Office yesterday (Tuesday) announced the bank-specific fees for use of the state guarantee for covered bonds. All charges for the guarantee programme have now been set.

Rating news: The Swedish Covered Bond Corp must take certain remedy actions set out in the documentation of its covered bond programme to mitigate the downgrade of its parent’s ratings by Standard & Poor’s last Wednesday, the agency said today (Monday).

Rating action: The Swedish Housing Finance Corp, SBAB, was yesterday (Wednesday) downgraded by Standard & Poor’s from AA- to A+. The AAA ratings of the covered bonds of its subsidiary, the Swedish Covered Bond Corp, were not affected.

The European bond market is bracing itself for a pick-up in guaranteed senior unsecured issuance from a wider range of jurisdictions as banks put the final touches to their new documentation and regulators release precise details of their respective guarantees.

While the Swedish National Debt Office has announced the fixed fees for its guarantee scheme and the bank-specific fees for guaranteed senior unsecured debt, market participants are still waiting for news on the individual fees that will be charged for guaranteeing covered bonds.

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.