Danske Bank has issued its second covered bond backed by a cover pool comprising Swedish assets, a Skr3bn (Eu340m/Dkr2.53bn) five year transaction that the issuer plans to follow up on in the Swedish market.

Lead managers Danske Bank and Swedbank built a book of slightly more than Skr3bn. Books were opened with guidance of the 115bp over swaps area, with the deal priced at 115bp over.

Cover pool “C” (“combined”) is backed by a mixture of residential and commercial Swedish mortgages. Danske first issued out of the pool in early March, with a Eu1bn five year benchmark at 52bp over.

“There was very good reception and a strong outcome,” said Andreas Torp, head of frequent borrowers at Swedbank.

He noted that Sweden’s covered bond market is entirely mortgage covered bonds, more or less 100% based on residential assets.

“This Danske transaction was a bit different – a new class if you want,” he said. “It’s somewhere in between regular credit and a benchmark traded covered bond in the domestic market.

“It is clear that Danske Bank is strongly committed to the Swedish market,” he added.

Torp said the pricing was based on comparable bonds in Sweden trading at an interpolated 75bp-90bp over swaps.

“We had discussions with investors about what sort of premium they would need, and we ended up at 115bp over,” he said.

Jacob Truelsen, syndicate official at Danske, said the issuer was committed to continuing to access the Swedish market.

“The plan now is to do one or two more in similar size, so that eventually we will have three outstanding bonds in Sweden,” he said. “Our intention is to create a fairly liquid curve of Swedish krona bonds so investors will have several options to buy Danske Bank bonds.”

He added that it would make sense to launch further deals “sooner rather than later”.

“Sweden’s local mortgage market is anything from one year to five years, so we will have maturities inside this,” he said, adding that the pool could be topped up, if necessary, by Norwegian commercial loans.

Torp said that during discussions many investors around the trade were interested in the product, but they needed more time to absorb it.

“The next issue should be very well received, due to the strong interest we got from investors,” he said.