Stadshypotek launched a debut, three year sterling floating rate note benchmark today (Monday) that marks the first public covered bond deal in almost two weeks and the first foreign issue from a Swede since September, while euros remains quiet due in part to holidays.

Stadshypotek parent, Svenska Handelsbanken, Stockholm

Leads HSBC and RBS went out with guidance of 23bp-25bp over three month Libor for Satdshypotek’s sterling FRN. Books were still open as The Covered Bond Report went to press.

The deal is the first non-domestic benchmark covered bond from a Swedish issuer since the end of September, when Stadshypotek sold a $1.5bn seven year Yankee.

A syndicate banker away from the leads said that it was a “good little trade that should be going fairly well”. At 23bp-25bp the issue was coming some 2bp tighter than secondary market levels, he added.

“The pricing is spot-on,” he said.

The syndicate banker said that Stadshypotek may have opted for a sterling floater because there was a decent bid in sterling for the format, and the euro-sterling basis swap looked attractive.

The same considerations may also have prompted a Nordea Bank £400m three year senior unsecured floater last week, he added. That deal was priced at 50bp over three months Libor.

“And let’s not forget that Swedish issuers also have some sterling funding needs,” he said.

The UK is one of six “home markets” for Svenska Handelsbanken, Stadshypotek’s parent and an official at the issuer said last August that it would like to increase its presence in the sterling market, where it has issued in senior unsecured before.

“In the UK the bank has a big presence on the street with more than 100 branches, so we are actually a British bank as well,” he said. “Long term we therefore have a big interest in being an issuer in sterling, in senior and covered.”

Another syndicate banker away from the leads said that the deal should go well.

“It’s a good name, it offers a good pick-up,” he said. “The pricing seems right also considering where last week’s Nordea senior unsecured deal in sterling was priced.”

The deal is the second sterling covered bond issue of the year after Australia’s ANZ Banking Group priced a £500m issue at 27bp over Libor on 24 January, which attracted £600m of orders.

Analysts at RBS pointed out that spread levels for UK fixed rate sterling covered bonds in the three to five year maturity range have tightened in the past year, moving from over 100bp over mid-swaps in April 2012 to less than 50bp over mid-swaps in February.

Stadshypotek’s deal is the first benchmark covered bond in almost two weeks. The last covered bond benchmark was launched by Berlin-Hannoversche Hypothekenbank on 29 January, a Eu1bn five year issue that came at 1bp through mid-swaps.

Syndicate bankers highlighted Chinese New Year celebrations, upcoming Spanish deficit data and Italian elections, which are scheduled for two weeks’ time, as factors that may hold back euro issuance this week as well.

“On the whole this is set to be a quiet week,” said one.

However, another said that primary market activity could pick up in the middle of this week already if market conditions permit, although issuers are not in a rush and the pipeline is thin.

“The market is pretty neutral,” he said. “It’s just quiet. There was no direction from Asia because markets are closed there and parts of Germany are closed because of Carnival.

“By the middle to the end of this week I would expect activity to pick up.”