DNB, SEB in dollars as US market offers deeper demand, better pricing

DNB today (Thursday) became the first European issuer to sell a US targeted benchmark covered bond this year, after SEB yesterday placed an inaugural, $1.25bn five year senior unsecured deal as dollars offered high quality Yankee names better terms than euros.

DNB Boligkreditt’s deal is the third Nordic Yankee FIG transaction in less than two weeks, after Swedbank sold a $1bn (Eu772.8m/Skr6.47bn) five year senior unsecured benchmark at 107bp over Treasuries on Tuesday of last week (5 March) and Skandinaviska Enskilda Banken (SEB) sold its senior deal yesterday.

Vincent Hoarau, head of FIs, covered bond & ABS syndicate at Crédit Agricole CIB, said that SEB’s move to tap the US dollar market was “logical” given that the issuer’s five year senior unsecured debt trades some 10bp-15bp wider in euros than in dollars.

“SEB is capitalising on Swedbank’s recent success in that format and sector of the curve,” he said. “It was a very smart move and well timed.”

DNB Boligkreditt’s move to tap the dollar market comes after investor pushback forced Sweden’s Stadshypotek to set guidance some 5bp wider than initial price thoughts on a Eu1bn long five year deal on Tuesday (see separate article).

“For low beta, the euro market isn’t necessarily the best place to be anymore,” said a syndicate official, “and the US dollar market is back in favour, with deeper demand at low spreads and better pricing.”

At the time of writing DNB leads Bank of America Merrill Lynch, Goldman Sachs, JP Morgan and Morgan Stanley had revised initial price talk of the 50bp over Treasuries area to guidance of 48bp-50bp over, and had gathered more than $2.25bn in orders.

DNB’s deal, a five year, is the fourth US dollar benchmark covered bond this year, but only the first from a European issuer and its first US dollar in just under two years.

SEB’s senior unsecured deal was its first public US dollar benchmark senior transaction in the wholesale term market, although the issuer has been active in the dollar money market as well as private placements up to three years.

“We have not been active in the US dollar term market since issuing subordinated deals some time ago,” said John Arne Wang, head of treasury management at SEB, “but we are hardly a new name in the dollar market.”

The deal was priced at 100bp over Treasuries, the tight end of guidance of 105bp plus or minus 5bp, after leads Bank of America Merrill Lynch, Barclays, Citi and Deutsche Bank built an order book of just over $2.4bn.

Wang acknowledged that its dollar deal provided funding inside euro levels — in the range of 10bp-11bp — but said that the arbitrage opportunity was not the main trigger for the transaction although it did increase the issuer’s motivation to go ahead with such a transaction at this time.

“The important thing for us is to gradually establish a curve in US dollars,” he said, “and we also have some dollar needs. The outright level in dollars is the critical factor to us and less so how it compares with euro spreads.”

LF Hypotek sold a Sfr125m 10 year issue today at flat to mid-swaps that was increased from an initial Sfr100m, according to a banker at lead manager Credit Suisse.