Svenska Handelsbanken subsidiary Stadshypotek sold a $1.25bn (Eu970m) five year covered bond yesterday (Thursday), attracting some $1.7bn of demand in a return to form after a difficult Eu1bn five year deal for the issuer in March.

Stadshypotek parent Svenska Handelsbanken, Stockholm

Leads Credit Suisse, Goldman Sachs, JP Morgan and RBC went out with initial price thoughts of the low to mid 40s over mid-swaps, then went out with official guidance of 42bp-44bp over, before fixing the pricing at 42bp over mid-swaps, according to a syndicate official at one of the leads. The spread was equivalent to a spread of 57.95bp over US Treasuries.

The deal attracted demand of $1.7bn from 45 accounts, said the syndicate banker, adding that this was a good number for a dollar covered bond.

“It speaks very well for the dollar market and the volume of demand that can be achieved, albeit not all of it having been placed in the US,” he said. “We saw significant central bank participation.”

He said that the pricing was equivalent to a level slightly through what would be available in euros, with the deal also having tightened 1bp in the secondary market.

“It’s a good price for them,” he added. “Given that Stadshypotek had a bit of a hard time with their last deal, the euro, this was a good result.”

In March Stadshypotek priced a Eu1bn five year deal 5bp wider than initial price thoughts after encountering resistance from investors.

The last Swedish dollar benchmark was a $1bn five year deal for Swedbank Hypotek that was priced at 46bp over mid-swaps in late March. Stadshypotek’s last visit to the dollar market was a $1.5bn seven year issue priced at 72bp over mid-swaps in late September.

RBS analysts noted that the new issue takes dollar covered bond issuance this year to $10.75bn.

“It is increasingly unlikely that US dollar supply will be able to match the record volumes of the last two years ($41bn in 2012 and $43bn in 2011), even if the Canadian issuers are expected to come back to the market in the second half of the year,” they said.