Swedbank Mortgage launched a Eu1.5bn four year covered bond yesterday (Tuesday), only a few days after selling a dollar benchmark, having been encouraged by the wealth of new issues last week.

“We saw a good opportunity and we went for it in order to front-run expected supply,” Martin Rydin, head of long term funding at Swedbank, told The Covered Bond Report. “A few covered bond trades end of last week went fine; we wanted to draw from that.”

Rydin added that the successful execution of a Nordea Bank Finland transaction on Friday had been a factor in encouraging the issuer to access the market.

Leads Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank, Swedbank and UBS set initial guidance at the high 40s over mid-swaps when they opened books at 0800 London time.

After 30 minutes the leads had built a book in excess of Eu1.1bn, enabling them to refine guidance to 47bp over. By noon books had reached in excess of Eu1.8bn, comprising more than 80 accounts, and pricing was revised to 46bp over.

Swedbank had to pay a new issue premium of 5bp-6bp, according to the leads.

“It’s a market where every trade which has been done has had to pay a new issue premium of 7bp-15bp,” said Rydin. “At the time of the announcement we saw our interpolated secondary mid level around 40bp over,” he added. “If you look at that the new issue premium, we clearly paid less than what we have seen in most other recent covered bond transactions, so we were very pleased.”

Anthony Tobin, syndicate director at Bank of America Merrill Lynch, said he believed it to be the lowest new issue premium the market had seen so far.

“In the longer end we’ve seen issues paying as much as 15bp-20bp and in the shorter end between 7bp-10bp,” he said.

Swedbank used an outstanding June 2015 trading at 37bp mid and a January 2016 at 45bp mid to price the transaction.

“It was the only transaction from yesterday that managed to print through the initial pricing,” said Tobin.

“They also managed to get the deal up to a nice Eu1.5bn,” he added, “so we’ve really seen some strong results.”

Rydin said the deal was expected to go fine because he had anticipated strong interest for four years, particularly given that there is strong demand for Swedish covered bonds.

“However, it clearly went even better than expected with the price having tightened from an initial talk of high 40s to a final pricing at 46bp over and the deal being upsized,” he said.

“We felt that the best investor demand was in the mid part of the curve,” he added. “We did a five year in the dollar market last week, so that maturity was out of the question, but a September 2015 maturity fits well into our maturity profile.”

Germany took 32%, the Nordics 20%, Asia 13%, the UK 9%, Switzerland 8%, the Benelux 5%, Austria 3%, France 3%, and others 7%. Banks took 42%, funds 26%, central banks 22%, private banks 5%, insurance companies 3%, and others 2%.