The Danish parliament will tomorrow (Friday) discuss government legislation on conditional forced maturity extensions in mortgage bonds for the first time, with the final draft softer than the initial proposal in a bid to address investor concerns.
BRFkredit, Nordea Kredit and Realkredit Danmark finished the latest round of sales to refinance ARM bonds last Friday (29 November), with analysts noting that spreads were the lowest since before the crisis and that Nordea achieved the lowest absolute yield ever at an auction.
A Danish government plan under which bonds refinancing Danish ARMs would automatically extend in certain stressed scenarios would greatly reduce associated refinancing risks, according to Fitch, but the rating agency on Wednesday also said that there are questions regarding details of its implementation.
DLR Kredit and Nykredit Realkredit wrapped up November auctions for the refinancing of their ARM bonds yesterday (Wednesday), with officials at both institutions highlighting the high quality of bidding.
Bonds to refinance ARMs have been sold at record low yields and spreads since the latest Danish auction season began on Monday, with this being attributed to lower supply and planned changes to ARMs — even though these were postponed by three months.
The Danish government yesterday (Wednesday) moved decisively to address concerns about refinancing risks in its mortgage system by announcing that from 1 January many covered bonds, including those related to ARMs, will face forced extension in certain stressed scenarios.
Danish lenders are responding to regulatory and rating agency pressures to reduce the share of adjustable rate mortgages (ARMs) with the launch of Cita-based loans and a revival of fixed rate callables, with Moody’s highlighting Nordea Kredit’s success in the latter as credit positive.
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.
Nykredit Realkredit kicked off autumn refinancing auctions in Denmark today (Thursday), with “extraordinarily high” interest coming in for its offering of one year ARM bonds, according to an official at the issuer, although an analyst said the outcome was not surprising.
Nykredit will launch its August refinancing auctions next Thursday, with one year ARM bonds dominating after a smaller than expected take-up of longer interest reset periods. Meanwhile, Realkredit Danmark is launching a Cita product aimed at addressing concerns about refinancing risk.