DLR Kredit next up with ‘no hiccups’ so far for ARM auctions

Aug 29th, 2013

Nordea Kredit and Nykredit Realkredit wrapped up adjustable rate mortgage (ARM) bond auctions today (Thursday) and BRFkredit is set to finish its sales tomorrow, with an official at BRFkredit saying that “no hiccups whatsoever” have affected the autumn auctions so far.

DLR Kredit is the only other mortgage credit institution that will hold auctions to refinance October 2013 ARM loans, and will launch its offerings on Tuesday, 3 September.

BRFkredit’s auctions started on Monday and will finish tomorrow, with Dkr14.95 (Eu2bn) in total on offer. BRFkredit’s bonds are offered by way of a tap sale.

Anders Lund Hansen, group treasurer at BRFkredit, said that BRFkredit’s auctions have been going well, as has been the case for the other mortgage banks holding auctions this autumn.

“I see good demand and solid spreads for the one, three and five year bullets,” he said. “There have been no hiccups whatsoever.”

Nordea held auctions over three days this week, from Tuesday to today, offering Dkr24.14bn (Eu3.24bn) of Danish krone denominated bonds and Eu315m of euro denominated bonds.

The vast majority of the Danish krone bonds were one year ARM bonds (Dkr21.75bn), for which the bid-to-cover declined from 2.93 to 2.91 and then 2.54 today. The largest bid-to-cover during Nordea’s auctions was 6.48, for Dkr675m of three year bonds auctioned yesterday (Wednesday).

Nykredit is satisfied with its auctions, said Lars Mossing Madsen, chief dealer at the issuer.

“They went well, and especially the one year bonds tightened a couple of basis points during the auction,” he said. “Today they reached around 16.5bp over Cita, which is the tightest level since 2008.”

The highest bid-to-cover during Nykredit’s auctions was 6.05, for the first offering of five year Danish krone denominated bonds, on 16 August.

Madsen said that for Nykredit mortgage borrowers the refinancing level is roughly in line with expectations heading into the auctions, and only marginally higher than that resulting from 2012 October refinancing auctions.

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