Sweden’s FSA and National Debt Office have questioned the rationale behind proposals from the Riksbank that would tighten its rules on the use of covered bonds as repo collateral, and disputed that certain structural risks and vulnerabilities are not reflected in covered bonds’ ratings.

Moody’s has improved its outlook on the Swedish banking system from negative to stable, citing the positive impact of strong economic growth on asset quality and profitability, but the rating agency also warned of the consequences of a housing boom.

Skandinaviska Enskilda Banken (SEB) built a “rock solid” order book for a Eu1bn long seven year covered bond issue on Monday, according to an official at the Swedish issuer, who said the euro market continues to offer more attractive pricing terms and volume access than its domestic market.

Third quarter results of the big four Swedish banks came in below consensus expectations this week, with the impact of persistently low interest rates on net interest income (NII) and weak capital markets cited as contributing to the weaker than expected performance.

Swedbank Hypotek reopened the sterling covered bond market after two months without benchmark supply on Wednesday, and although the FRN was priced 10bp wider than preceding deals an official at the issuer said the sterling market still offered attractive funding.

A Swedish government plan to introduce a legislative 2% minimum overcollateralisation level – prompted by EU derivatives clearing regulations – would be credit positive for covered bonds, according to Moody’s.

The Swedish government is proposing to introduce a 2% minimum overcollateralisation requirement in legislation so the country’s covered bonds will meet the criteria necessary for exemption from central clearing obligations for OTC derivatives under the European Market Infrastructure Regulation (EMIR).

Revived plans to introduce compulsory amortisation requirements for new mortgage loans in Sweden could enhance Swedish covered bonds’ credit quality, according to Standard & Poor’s.

Sweden’s Riksbank kept the repo rate unchanged at minus 0.35% yesterday (Thursday), although market participants still expect the central bank to engage in further monetary policy measures over the coming months.

Stadshypotek sold a £300m three year FRN covered bond on Monday, proving that the sterling market is an appealing option for issuers and printing at a tighter price than could have been achieved in the domestic market, according to bankers.