Stadshypotek will price the first Swedish benchmark euro covered bond in nearly seven months today (Wednesday) after the cross-currency basis swap recently turned in favour of euro issuance amid overall spread tightening.

The Swedish bank, a subsidiary of Svenska Handelsbanken, met with nearly Eu4bn of demand for a Eu1.5bn five year issue that leads BNP Paribas, Crédit Agricole, Svenska Handelsbanken, RBS and UBS will price at 30bp over mid-swaps, the tight end of official guidance of 30bp-33bp over, revised from initial pricing thoughts of 33bp-35bp over. The latter generated some Eu2bn of indications of interest.

Stadshypotek parent, Svenska Handelsbanken, Stockholm

The deal is the first euro benchmark from Sweden since 30 August last year, when Swedbank Mortgage sold a Eu1.5bn four year issue at 46bp over, with an unfavourable cross-currency basis swap putting off Swedes from tapping the euro market until this changed last week, according to a syndicate official.

Another banker on the deal said that “euro levels have come screaming in this week”, showing just how far and fast the market is moving, and that this took market participants by surprise.

“It’s a phenomenal deal,” he said.

The lead syndicate banker said that Stadshypotek’s deal could be the first of a long series of Swedish supply, a perspective echoed by a syndicate official away from the deal.

“The transaction was set to come tight and to work well, especially given today’s market backdrop,” said the lead syndicate banker, citing positive tone in Asia and positive comments from the Federal Reserve overnight as having boosted sentiment at the open of European markets, with limited supply and an “exceptional” liquidity situation also playing a part.

At 30bp over, today’s deal is coming 1bp tighter than where a Stadshypotek May 2016 issue, the issuer’s last euro benchmark, was priced in May 2011. The lead syndicate official said this was trading around the mid-20s over swaps.

Syndicate officials away from the leads were positive about the deal, with one saying that it “will fly” and that the spread looked fair even though as an absolute spread level it is optically quite tight.

“If Stadshypotek is a blowout it could stimulate more Swedish supply,” he said.

Another syndicate banker away from the leads said the 33bp-35bp starting range was justified by the limited supply and recent spread performance.