Nykredit is planning to cut ARMs auctions from four times to twice a year as part of an initiative aimed at offering fewer but larger lines of covered bonds to meet LCR Level 1B criteria that have affected pricing in the Danish market, where the latest auction season ended solidly.
Spreads on Danish one year ARM bonds widened by up to 10bp over the first three days of the latest refinancing auction season this week and bid-to-cover ratios hit lows, despite a sharp fall in supply, with market participants struggling to remember such turbulent conditions and understand the moves.
Nordea Kredit wrapped up three days of refinancing auctions of adjustable rate mortgage (ARM) bonds today (Thursday), while BRFkredit and Nykredit have one day left, with “extreme” spread stability to slight tightening and curve flattening flagged as notable aspects of the sales.
Nykredit Realkredit will kick off Danish mortgage credit institutions’ October refinancing auctions on Monday, for which BRFkredit and DLR Kredit today (Thursday) announced expected supply figures, with analysts noting a shift away from one year ARM bonds.
A bill providing for the conditional maturity extension on certain Danish covered bonds removes refinancing risk for covered bond issuers and will have a “marked” credit positive impact on Nordea Kredit covered bonds, said Moody’s on Monday.
Denmark’s mortgage credit institutions are nearing the end of the latest ARMs refinancing season, with a covered bond analyst suggesting that the sales did not quite go as expected.
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.
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.
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.