Stadshypotek is pricing a Eu1bn seven year covered bond today (Wednesday) to kickstart what is expected to be a series of Nordic FIG deals in euros as issuers from the region emerge from blackouts and face enticing spreads and cross-currency levels.

Stadshypotek parent, Svenska Handelsbanken, Stockholm

Stadshypotek’s deal was launched shortly after its parent, Svenska Handelsbanken, released its third quarter results. Nordea Bank also announced results today, with Swedbank having done so yesterday (Tuesday). The end of blackout periods for Nordic issuers plus favourable cross-currency levels was seen as a combination that could trigger euro benchmark issuance from the region, in covered bonds and/or senior unsecured.

A syndicate banker said that spreads and cross-currency levels are so interesting that euros are alluring even if issuers do not have the funding needs to tap the market before next year. He said that more Nordic issuance is possible even this week, noting, for example, that Norway’s DNB reports results tomorrow (Thursday).

New issuance from core jurisdictions is coming at tight levels but “working nonetheless”, which wasn’t always the case, he added.

The last Swedish euro benchmark covered bond was a Eu500m seven year issue for Länsförsäkringar Hypotek at the end of April. Stadshypotek and SEB have tapped the US dollar market in the interim.

Stadshypotek leads JP Morgan, Société Générale, Svenska Handelsbanken and UBS will price the new Eu1bn seven year deal at 9bp over mid-swaps, after guidance of the 10bp over area, on the back of more than Eu1.6bn of orders, according to a lead syndicate official. Initial price thoughts were in the low double-digits.

Syndicate bankers away from the deal thought the pricing was right, having expected the transaction to end up coming inside 10bp over. They said the new issue premium was minimal, which chimed with the lead syndicate banker’s assessment.

He cited outstanding Nordea levels as comparables, with 2020 and 2018 issues from earlier this year at 6bp over and 1bp over mid, which would put fair value for a Nordea seven year at 9bp over.

“Stadshypotek should come around 1bp inside in covered, so it’s about a 1bp-2bp premium, so it’s minimal,” he said. “It feels like the issuer was going for price over size and is happy with a single-digit outcome.

“As soon as they came out of blackout they were ready to go,” he added.

Stadshypotek’s deal comes on a quieter day in the markets after a hive of activity yesterday, which included two euro benchmark covered bonds, for Royal Bank of Canada and UniCredit Bank Austria.

RBC sold a Eu1.5bn five year issue at 5bp over mid-swaps that was complimented by syndicate bankers away from the leads — as “spot on” and “a class deal”, for example.

Leads Barclays, Commerzbank, ING, RBC and Société Générale gathered nearly Eu2bn of orders for the deal.

David Power, vice president, corporate treasury at Royal Bank of Canada, said that the issuer is very happy with the transaction, which he said was well-timed with respect to credit spreads and the euro-dollar basis.

“It’s the most attractive euro covered bond level swapped to dollars that we’ve seen since early 2008,” he said. “So from that standpoint we’re very happy with the transaction from a pricing and also a size perspective.”

Eighty-five accounts were involved in the transaction. Germany and Austria took 46%, UK and Ireland 17%, France 14%, the Benelux 5%, Scandinavia 5%, Switzerland 5%, Asia 4%, and others 4%. Banks were allocated 62%, asset managers 24%, central banks and official institutions 13%, and insurance companies 1%.

UniCredit Bank Austria met with more than Eu1.3bn of demand for a Eu500m no-grow public sector Pfandbrief that was re-offered at 25bp over mid-swaps, the tight end of guidance of 25bp-27bp over (will price in range).

Germany took 48%, Austria 20%, Nordics 7%, Asia 6%, France 6%, Italy 5%, the UK 4%, and others 4%. Banks were allocated 43%, portfolio managers 36%, insurance companies 10%, central banks 9%, and corporates 2%.