Swedbank heeds Nordic peers’ experience for $1bn five year

A US$1bn five year Swedbank covered bond launched at the end of March was prompted by positive feedback from US investors and the contrasting fortunes of recent euro and dollar Nordic benchmarks, said the issuer’s head of funding, but the mortgage lender could return to euros later this year.

The $1bn (Eu770m/Skr6.47bn) issue was launched on 26 March at 46bp over mid-swaps and tightened some 3bp in the secondary market the day after, according to Ulf Jakobsson, head of funding at Swedbank.

He told The Covered Bond Report that the decision to tap the dollar covered bond market was driven by several factors. Swedbank had recently updated its dollar covered bond documentation and wanted to make the most of the window of opportunity that opened in the dollar market after that, said Jakobsson.

The Swedish issuer had also received positive feedback from US investors that made it confident of the positive outcome of a dollar deal, he said, and favourable cross-currency basis swap levels made a dollar deal look attractive versus Swedish kronor or euros.

“The deal was priced well inside where a euro issue could be priced today,” he said at the time of the deal.

Leads Bank of America Merrill Lynch, Barclays, Deutsche Bank and JP Morgan gathered more than $1.6bn of orders for the transaction, for which they had set initial price thoughts in the 45bp-48bp over area.

Jakobsson said that the outcomes of recent deals for DNB in dollars and Stadshypotek in euros were also taken into account in the decision to tap the dollar covered bond market.

DNB Boligkreditt placed a well-received $2bn five year issue in the dollar market on 14 March, which was priced at 48bp over mid-swaps, increasing it from $1.5bn following strong investor demand.

Stadshypotek launched a Eu1bn five year issue on 12 March where pricing had to be widened some 5bp from initial price thoughts, to 14bp over.

“The positive result of DNB’s recent five year transaction was encouraging as it showed that there are good levels of demand for Nordic covered bond issues in the dollar market,” said Jakobsson.

“The less positive outcome of Stadshypotek’s recent five year transaction also contributed to our decision to go for a dollar issue rather than a euro one.”

Jakobsson said that the new issue will probably be the only dollar deal for Swedbank this year given limited funding needs. However, he said that the Swedish issuer could be looking at the euro market after the summer, noting that Swedbank’s last euro deal was in August 2011.

Swedbank’s last euro benchmark covered bond was a Eu1.5bn four year deal launched on 30 August 2011, which was priced at 46bp over mid-swaps attracting Eu2.5bn of orders.