Swedbank Mortgage achieved cheaper funding than that available in euros or Swedish kronor on Wednesday with a $1bn five year deal that was the first US dollar covered bond benchmark since 26 July. The issuer said that coming from outside the euro-zone proved a plus.

Leads Bank of America Merrill Lynch, Barclays Capital, Credit Suisse and JP Morgan gave initial price talk in the high 70s over mid-swaps, according to a syndicate official at one of the leads, and priced the issue at 82bp over.

The Swedish issuer last sold a dollar deal in March, a $2bn transaction split into fixed and floating rate tranches of $1bn each. A three year FRN was priced at 45bp over three month Libor and a five year fixed rate piece at 71bp over mid-swaps.

Although the funding levels for the latest transaction were a little higher, Martin Rydin, head of long term funding at Swedbank, told The Covered Bond Report that this was to be expected given the challenging market conditions and given that the transaction heralded the reopening of the dollar covered bond market.

Rydin added that the bank had obtained funding that was around 10bp cheaper than in the euro benchmark market, and also inside of the levels in the domestic covered bond market.

“The dollar market was by far the most cost efficient,” he said.

As well as the dollar market being cheaper, Rydin said the issuer expected to have a first mover advantage.

“I think we were one of the first banks to update our 144A covered bond programme following our Q2 results, so I guess we were one of the first who actually were able to issue,” he said. “One reason for us to move was that we thought we’d be the one only ones looking at the dollar market, while the euro market might be quite crowded.”

Coming from a financially sound jurisdiction also helped, said Rydin.

“Sweden in general has good and sound finances, which means that there is a safe haven bid regarding Sweden,” he said, “and it’s probably also a positive factor that Sweden is not a part of the euro-zone area.

“That is something that investors like, but it’s very difficult to see what effect it has in a particular transaction, though in general we see very good demand for Swedish covered bonds.”

After doing its three and five year dual tranche benchmark in March, Rydin said the issuer was certain it wanted to do a five year this time.

“In dollar covered bonds, which is still a relatively young market, the option is to go with either a three year or a five year,” he said, “and the five year part of the curve suits our maturity profile better than the three year part of the curve, so it was an easy decision to go with the five year.”

Rydin added that he was somewhat surprised that the transaction was driven by different investors to those that took the March issue. Central banks took 47%, asset managers 23%, insurance companies 16%, banks 9%, and pension funds 5%. The US took 68%, continental Europe 18%, UK 9%, and Asia 5%.