Nykredit Realkredit wrapped up two weeks of auctions today (Thursday), hitting historically low yields to pass on attractive rates to borrowers, an official at the mortgage bank told The Covered Bond Report, and for the first time it achieved an equal distribution of volumes across three auction periods in a year.

Nykredit offered some Dkr110bn (Eu14.8bn) across an 11 day auction period from 22 August to today, according to Henrik Hjortshøj-Nielsen, executive vice president, group treasury at Nykredit.

With this latest auction season completed Nykredit has for the first time managed to hold three equal-sized auctions in a year since the issuer first moved to spread refinancings of bonds funding adjustable rate mortgages (ARMs), he said.

“Our aim was to have equal distribution between three periods,” said Hjortshøj-Nielsen, “and now we will decide when to start with refinancings in July.”

The bulk of covered bonds refinanced at Nykredit’s September auctions have been one year ARM bonds, although the issuer has also been offering three year and five year non-callable bullets.

With interest rates at historically low levels Nykredit has been selling one year bonds at a yield-to-maturity of 0.32%, three years at 0.66% and five years at 1.17%, according to Hjortshøj-Nielsen, which translates to 35bp over Cita, 2bp through swaps, and 15bp over swaps, respectively.

“That’s much tighter than in previous years,” he said.

Demand was very strong during the first six days of the auctions, added Hjortshøj-Nielsen, and was then weaker for two days before picking up again.

“Overall the change was not that big though,” he said. “The yield-to-maturity widened from 0.30% to 0.36% and then came back down again.”

He said that it is positive that rates are so low as these can be passed on directly to borrowers given the balance principle underpinning Danish mortgage bonds.

“It’s a very good story for households,” he said. “And demand in the real estate sector is picking up as people become more willing to borrow.”

Overall the housing market is stabilising, he said, as a result of which Nykredit will probably adjust its plans to issue junior covered bonds. These are sold by Danish mortgage banks to be able to comply with continuous loan-to-value requirements for cover pool assets.

“We don’t see a growing need for issuance, except for refinancing,” said Hjortshøj-Nielsen.

Nordea Kredit is holding the last of three days of auctions today, with analysts yesterday (Wednesday) having noted that the spread difference between its and Nykredit’s one year bonds aligned with expectations after an “outlier” on the first day their auctions ran in parallel, on Tuesday.

One year Nykredit bonds were auctioned at 36.1bp over Cita today and one year Nordea paper at 29.6bp over, according to an analyst. That compares with 35.5bp over and 30.1bp over yesterday. On Tuesday Nykredit’s one year paper came at 33bp over and Nordea’s at 31bp over.

After a spread difference of 2bp between the issuers’ one year bonds on Tuesday, the first day of Nordea’s auctions, a difference of 6bp-7bp that has settled in is more in line with expectations, according to analysts.

“The spread difference should be 6bp-7bp going forward,” said one.

Nordea sold some Dkr21bn of one year bonds across its auctions.