Denmark’s mortgage banks are achieving record low yields and spreads in the latest season of their traditional end-of-year refinancing auctions, with Nykredit Realkredit set to wrap up sales from the three largest issuers next Thursday.

Nordea Kredit finished its auctions on Tuesday, and Realkredit Danmark’s (RD’s) last day of auctions is today (Friday), with BRFkredit sales finishing on Tuesday, a day after DLR Kredit begins. Nordea Kredit sold Dkr57.975bn (Eu11.8bn) and Eu2.525bn (Dkr18.8bn) of bonds

Jacob Skinhøj, chief analyst at Nordea Kredit, said that the one year ARM bonds are being auctioned at very tight spreads, and that yields are set to be the lowest ever, and spreads the tightest ever during any refinancing auction.

“Nordea one year bonds are trading at around 20bp over Cita,” he said, “after tightening 3bp-4bp at the beginning, and Nykredit and Realkredit Danmark one year bonds are trading more or less at the same level, around 23bp-23.5bp over Cita.”

Lars Mossing Madsen, chief dealer at Nykredit Realkredit, said that the auctions are going even better than expected. Spreads over swaps snapped around 10bp tighter immediately after the auctions started, with interest remaining strong throughout.

“The auctions continue to be extremely strongly bid,” he said, “without spreads weakening even as the auction period went on.”

He gave the outcome of Nykredit Danish krone and euro denominated floating rate covered bond sales on Thursday as an example of the strength of demand.

“The bid-to-cover was huge,” he said. “We auctioned Dkr17.5bn but there was a bid for Dkr73bn, which is a lot of interest in one auction.”

Jan Østergaard, senior analyst at Danske Bank, said that the pricing on the one year bonds has been very stable despite bid-to-cover ratios declining over the course of the auctions – although from a high initial level. Spreads tightened at the beginning on the one, three and five year ARM bonds, he added, but were generally stable over the latter course of the auctions.

“The auctions have been pretty strong,” he said. “The bid-to-cover on the one year bonds has been very high, although over the past two days it fell and on Thursday it was the lowest.”

For example, the bid-to-cover on one year Nykredit Danish krone-denominated ARM bonds was 1.86 on Thursday compared with 6.16 on the mortgage bank’s first auction day.

“But still the spreads were almost unchanged to slightly tighter,” said Østergaard.

The differential between the spreads on the different mortgage banks’ one year bonds has been fairly small, he added.

Nordea’s have been trading 4bp-5bp tighter than RD’s and Nykredit’s, as expected, with BRFkredit’s around 3bp wider compared with the latter two.

“There was no major change there compared with before the auctions,” said Østergaard. “Spreads have tightened between the mortgage banks partly because all of the SDO capital centres are now rated triple-A by S&P.”

Standard & Poor’s on Monday assigned a triple-A rating with a stable outlook to Realkreditobligationer (ROs) issued out of DLR Kredit’s General Capital Centre.