Nykredit ARM auctions smooth and steady

There was a break in Nykredit Realkredit ARM bond auctions today (Thursday) as the issuer held standalone auctions of floating rate notes, with the ARM bond auctions said to be unfolding consistently since the first fixed rate bullet bonds were offered last week.

Nykredit launched Denmark’s latest round of refinancing auctions last Thursday (15 August), and has since then offered Dkr43.5bn (Eu5.83bn) of one year ARM bonds, Dkr4.6bn of three year bonds, and Dkr4.35bn of five year bonds, according to results published by the issuer.

There are five more days left of Nykredit’s refinancing auctions. Geert Ditlev Kunde, chief analyst at Nykredit Realkredit, said that the auction results have been fairly consistent.

“The auctions are going in line with expectations,” he said. “There is a marginal weakening of demand and a slight widening, but only between 0.5bp-1bp, and although yesterday was a bit soft things are pretty stable.”

He put the latest spread on one year ARM bond at 18.5bp over Cita and said that this represented a widening of perhaps 0.5bp.

The bid-to-cover ratio on the one year bond auction has declined from 3.44 last Thursday to 2.81 yesterday (Wednesday), but Kunde said that it was normal for the strongest demand to come in at the beginning of the auctions, and that a bid-to-cover ratio of around 3 was positive.

The spread on three year ARM bonds widened slightly to 15.5bp through six month swaps yesterday, from around 16bp-17bp through the days before, he added. The five year ARM bonds have been trading at 4bp over six month swaps, he said.

BRFkredit will hold sales from Monday to Friday of next week, with Nordea Kredit auctions on Tuesday to Thursday.