Covered bond reopening eyed as Nordics begin reporting

The benchmark covered bond market was quiet this week due to public holidays and blackouts, but market conditions were described as positive by bankers, and Nordic financial institutions, which are among the first to report results, have been cited as a potential source of issuance.

Syndicate officials said the subdued activity was due to issuers being ruled out because of blackouts and absences due to seasonal holidays rather than any lack of interest on the buy-side, with one highlighting strong investor flow in SSAs as demonstrating that demand is available.

Financial institutions have meanwhile begun announcing their results, with some Spanish banks having already announced figures this week.

Financial institutions have meanwhile begun announcing their results, with some Spanish banks having already announced figures this week.

SBAB and SEB are scheduled to kick off the Nordic reporting season with the release of results tomorrow (Friday), with several of their peers due next week.

Bankers suggested that non-euro-zone Nordic issuers could be tempted to come to the euro market.

“Since the market is in good shape and credit spreads remains tight, we’d expect Nordic issuers to be looking at the euro market when they emerge from blackout, but their willingness to act will of course depend on their funding needs, given that Nordic banks have already raised Eu14bn in the euro market alone so far this year,” said Alex Sönnerberg, Nordic FIG DCM at Crédit Agricole CIB. “Nevertheless, perhaps we’ll still see some opportunistic covered bond deals given that the cross-currency basis swap spread has moved so much in the issuer’s favour lately, or perhaps some floating rate senior bonds, which has been a big trend among continental banks lately.”

The last Swedish euro covered bond benchmark was a Eu1.25bn five year Stadshypotek deal on 24 March. That was priced at 5bp over mid-swaps, making it the joint tightest non-German euro benchmark since the onset of the financial crisis.