Swedbank Mortgage priced a $1.5bn five year US dollar covered bond on Friday, and an official at the issuer told The Covered Bond Report that the US market was a “natural” choice given timing considerations and improved conditions there.

Swedbank shines

Bank of America Merrill Lynch, Deutsche Bank, JP Morgan and UBS priced the deal at 105bp over mid-swaps at 1700 CET on Friday. The transaction is free to trade when markets open in New York today (Monday), according to a syndicate official at one of the leads.

He said the deal was very successful, involving “the usual suspects”.

Swedbank’s deal came two days after fellow Swede Stadshypotek reopened the Swedish euro benchmark market with the first such deal in nearly seven months, a Eu1.5bn five year that was re-offered at 30bp over mid-swaps.

A syndicate banker on Swedbank’s deal put the euro equivalent spread over mid-swaps at around 40bp.

Another syndicate official away from the leads put the euro equivalent at 45bp over mid-swaps and said it came flat to Swedbank’s March 2017s that were trading at 44bp on the mid.

“Pricing seemed pretty sensible to me,” he said.

Ulf Jakobsson, head of funding, Swedbank Mortgage, told The CBR that the issuer had observed a gradual improvement of the US dollar covered bond market over the past month, with both secondary spreads and new issue concessions tightening significantly, and that the funding costs in terms of spread were roughly in line with those available in the euro benchmark market.

“The issuance window to do a dollar deal is shorter than in euros because the 144A documentation has to be in place,” he said. “It was natural to go for dollars when we believed there was a good market backdrop.”

Orders for the five year deal amounted to almost $2bn, according to Jakobsson.

“We printed a $1.5bn deal, which was more than expected, but due to the size and quality of the order book it would have been difficult to print less than that,” he said.

With the issuer having limited funding needs for 2012, a euro benchmark transaction would probably be a project for the second half of the year, he added.