Stadshypotek yesterday (Wednesday) priced the tightest Swedish euro covered bond since spring 2008, according to a lead syndicate official, with another calling the Eu1.5bn five year deal “a powerful return to form” for Sweden’s covered bond issuers in euros.

The deal is the first Swedish euro benchmark covered bond since the end of August 2011, with the cross-currency basis swap having worked against such Swedish supply until only recently, and was strongly oversubscribed, also garnering the largest order book for a Nordic covered bond since spring 2008, according to the lead syndicate official.

SEB analysts said that they expect Swedish issuers to increasingly come to the euro market because the relative cost of issuing in euros in five years has decreased considerably – reaching a four month low – and Nordic issuers are looked upon favourably by euro investors given comparatively strong fundamentals.

“Given such strong demand and a successful transaction [for Stadshypotek], we expect more Swedish issuers to follow,” they said, adding that any euro issuance will serve to support the 2017 segment in Swedish krona covered bonds.

Tim Skeet, managing director, financial institutions group, RBS, said that a big swing in the cross-currency basis swap, combined with a tightening of secondary spreads, paved the way for the deal.

“You lost cost on the basis swap and reoffer spreads, with that double benefit a compelling reason to come to market,” he said. “There were some quite dramatic moves across the market early this week, and for Stadshypotek it all came together very quickly.”

Some 131 investors placed an aggregate of Eu3.9bn of orders for the deal.

A syndicate banker at one of the leads – BNP Paribas, Crédit Agricole, Svenska Handelsbanken, RBS, and UBS – said that this represents the largest order book for a Nordic transaction since the spring of 2008, with a reoffer spread of 30bp over mid-swaps the tightest pricing for a Swedish euro covered bond since that time, too.

Initial pricing thoughts were 33bp-35bp over mid-swaps, with guidance then revised to 30bp-33bp over before the pricing was fixed at 30bp over. This incorporated hardly any new issue premium, according to the lead syndicate official, and helped reprice the euro covered bond market.

The deal has already performed, according to a lead syndicate official, trading at 23bp over today (Thursday). He said that the cross-currency basis swap has moved roughly 20bp-25bp, coming in steadily over the past two months.

Stadshypotek’s deal was “strategically opportunistic”, said RBS’s Skeet, adding that the bank’s peers in Sweden will no doubt be assessing euro benchmark opportunities, albeit without being under much funding pressure.

“It was a powerful return to form for the Swedish banks, who after a long absence are now proving their mettle by flying the flag,” he said.

“Everyone will be looking at this, wondering how long this situation will last.”

However, Nordea yesterday priced a $2.75bn dual tranche senior unsecured three and five year US dollar deal after in January selling a Eu1.25bn long seven year unsecured issue in euros. Swedbank has also tapped the senior unsecured market this year, and is understood to have limited appetite for euro covered bond issuance.

Germany took 29% of Stadshypotek’s deal, Austria and Switzerland 12%, the Nordics 12%, Benelux 11%, France 10%, UK and Ireland 6%, Middle East 3%, Asia 3%, Iberia 1%, and others 13%.

Banks were allocated 37%, fund managers 32%, insurance companies and pension funds 18%, central banks and official institutions 11%, and others 2%.