Danish issuers achieved historically low yields in this year’s September auctions, which finished today (Tuesday), suggesting that a re-evaluation by Moody’s of elements of its view of Denmark’s mortgage system has not affected demand.

Nykredit, Copenhagen

Nordea Kredit achieved the lowest interest rate on bonds issued in the annual autumn auctions, on 8 and 9 September, of 1%, with Nykredit group’s levels varying from 1.16% to 1.68%, and DLR Kredit setting its rate at 1.23%.

Nykredit group, comprising Nykredit Realkredit and Totalkredit, sold Dkr57bn (Eu6.4bn) in fixed rate bullet bonds and Dkr23bn (Eu3.1bn) in floating rate bonds over 10 days between 5 and 20 September, primarily issuing from its new capital centre H, which was rated Aa1 by Moody’s and AAA by S&P.

Nykredit first vice president Lars Mossing Madsen told The Covered Bond Report that Moody’s re-evaluation did not have any impact on the bank’s auctions.

“The daily interest on our auctions was at least as good as last year,” he said. “I think it’s because they’re still reasonably highly rated.”

Madsen said the quality of the bonds is basically the same; the only thing that had changed was Moody’s view of Danish mortgage lending.

Christina Falch, senior analyst at Danske Bank, said the Nykredit auction had gone “better than expected”. Danske had predicted a spread of 35bp-40bp over swaps, but Nykredit’s levels averaged 28.45bp over swaps. Shortly before the auctions Nykredit was trading around 30bp-32bp.

Madsen at Nykredit said the spread prediction was likely based on nervousness about where bonds from the new capital centre would trade and the supply.

“But these two things had no effect,” he said.

Falch at Danske also said there was some uncertainty regarding pricing of the bonds in the new capital centre H, which led to lower expectations for this September auction.

“There’s uncertainty over how the bonds should trade because of the new capital centre,” she said.

“I think in general, for both Danish and foreign investors, it’s still a good option to buy short dated covered bonds versus government bonds,” she added.

But she noted that interest from foreign investors was limited.

Jacob Skinhøj, chief analyst at Nordea Markets, had anticipated a difference of at least 10bp between Nordea and Nykredit.

Nordea Kredit offered Dkr8.5bn (Eu1.14bn) and Eu140m of bonds, trading about 8bp tighter than Nykredit, at 20bp over swaps.

Skinhøj believed it was mostly domestic investors that bought up Nykredit, due to the sovereign debt situation in Europe.

“I think they’re afraid of Greece and Spain,” he said.

Falch at Danske Bank said the difference in spreads was mainly due to the difference in auction sizes.

“Nordea Kredit sold Dkr8.2bn in one year bonds,” she said, “whereas Nykredit sold Dkr54.3bn in one year bonds.”

DLR Kredit auctioned Dkr5.4bn (Eu725m) in total on 7 and 13 September at 35.9bp over swaps.