Realkredit Danmark will on Monday kick off a Danish auction season when the country’s mortgage lenders sell some Dkr459bn (Eu61.7bn) of bonds, with Danish market participants confident that the impact of the financial turmoil on pricing will be limited and disagreements with Moody’s a side issue.

“The most astonishing thing about this is that, although it’s not a record high, it’s still a lot of bonds that we need to sell in euroland, but there is no debate on risk, or refinancing risk, or anything that Moody’s talked about,” Danske Bank chief analyst Jens Peter Sorensen told The Covered Bond Report.

“Everything is relaxed and calm, and there is a lot of focus on Denmark for being outside the euro.”

Nykredit first vice president Lars Mossing Madsen also said Moody’s re-evaluation of Danish mortgage re-financing was not expected to have any impact on the upcoming auctions.

“That was a story for the September auctions,” he said, “and we didn’t see much impact there. There has been no news about this since then, so we don’t expect it will affect our auctions.”

Jacob Skinhøj, chief analyst at Nordea Markets, noted that Danish auctions have drawn low spreads at each consecutive auction.

“Even in the annus horribilis of 2008,” he said, “the spread was not higher than 150bp over at any time during the auction

“The unlimited repo facility in the Danish central bank of course provides a helping hand in a stressed market situation,” he added, “and also continuously provides an intra-market repo rate below or at the central bank repo rates.”

Realkredit Danmark, a subsidiary of Danske Bank, will launch covered bond auctions on Monday as it begins to sell Dkr140bn (Eu18bn) in Danish krone denominated non-callable bonds and Eu4bn (Dkr31bn) in euro denominated covered bonds over two weeks. The issuer will be auctioning mortgage covered bonds maturing from 2013 to 2017.

Sorensen at Danske expects only a modest increase in spreads this December.

“It’s a little bit wider this year,” he said, “basically because Realkredit Danmark got these new capital centres, which have mainly non-callable bonds that give you a little bit extra on the price – about 5bp-10bp at most.”

The spread is expected to be between 45bp-50bp over mid-swaps.

“Usually we do around 30bp-35bp in December,” he said, adding that in the September auctions the spread was down to a mere 25bp over.

“You get a little bit extra premium – but not much.”

Nykredit group, comprising Nykredit Realkredit and Totalkredit, who will enter the market on 29 November, also expects a spread difference of around 10bp from last year, putting the pricing for its bonds this year at about 50bp over.

“I guess the general environment in the market has had an influence in the Danish mortgage market,” said Madsen at Nykredit. “It could also have something to do with liquidity, since spreads are widening all around Europe.

“I don’t think 10bp is that much, to be honest.”

Nykredit will auction a total of Dkr136bn (Eu18.3bn) between 29 November and 14 December. The auctions will refinance Dkr72bn (Eu9.7bn) of Nykredit Realkredit’s and Totalkredit’s adjustable rate mortgages (ARMs) as well as refinancing Dkr22bn (Eu3bn) of Nykredit’s Cibor and Euribor linked loans and Totalkredit’s BoligXlåns. The equivalent of Dkr42bn (Eu3bn) will be sold in euro denominated notes.

“Traditionally there is good interest in Danish covered bonds,” said Madsen.

Nykredit is offering about Dkr25bn (Eu3.3bn) less than in the last December auction, reflecting it having spread out its auctions from last year.

“This time we’re going to issue notes in Danish kroner and euros, some of which are going to expire in July 2013,” said Madsen, “which means the next time they will be auctioned is July, not December.

“We still want to spread out our auctions further.”

Planned Danish auction volumes (Dkr bn) (article continues below)

Source: Issuers

Nordea Kredit plans to sell Dkr75.825bn (Eu10.19bn) of Danish krone bonds and Dkr22.478 (Eu3bn) in euro denominated notes from 28 November to 9 December. It anticipates the lowest spread of the three mortgage banks, at 45bp over.

Skinhøj at Nordea Markets said he expects Nordea to trade about 5bp more expensively than Realkredit Danmark and 10bp more expensively than Nykredit. He anticipated higher international investor demand in this year’s auction.

“I expect foreign investors to buy a larger share this year than last year,” he said, “because the spreads are attractive and Denmark seems to be the new safe haven.

“Investors consider Swedish and Danish covered bonds like German Pfandbriefe, and they can diversify a little by buying this product.”

He said Nordic covered bonds had seen stronger investor interest during the autumn of 2011 due to the countries not being members of the euro-zone, and therefore not having to pay the bill for the Greece’s bailout. He added that investors also receive a larger pick-up than if they had bought German covered bonds.

BRFkredit announced today (Friday) that it will be selling non-callable bullet bonds between 24 November and 7 December to refinance adjustable rate mortgage loans, comprising an expected Dkr51bn and up to Eu300m (Dkr2.23bn).