Sweden’s Stadshypotek priced a Eu1.25bn five year covered bond on Monday, 9bp inside its domestic curve, with an official at the issuer noting that the prevailing euro market provided a “unique” funding opportunity for Scandinavian issuers.

Stadshypotek parent Svenska Handelsbanken, Stockholm

Leads Barclays, BNP Paribas, Nomura, Svenska Handelsbanken and UBS collected more than Eu1.75bn of orders for Stadhypotek’s first euro covered bond since it issued a Eu1bn seven year priced at 9bp over mid-swaps in October.

Strong investor demand allowed the leads to open books with a spread in the high single-digits over, before they set guidance at 7bp over after collecting more than Eu1bn of orders in the first hour. With books in excess of Eu1.75bn, the leads set the size at Eu1.25bn and fixed the spread at 5bp over.

According to Magnus Karlsmyr, head of funding at Svenska Handelsbanken, this equates to 25bp over Stibor, putting the euro deal 9bp inside the issuer’s interpolated domestic level of 34bp over Stibor.

“It is very rare to get 8bp or 9bp inside the domestic curve,” he told The Covered Bond Report, “so this was a unique opportunity to get much cheaper funding in the euro space than at home.”

Excluding German Pfandbriefe, the deal joined Royal Bank of Canada and KBC as the tightest issued euro benchmark covered bonds since the onset of the financial crisis.

“This was a very successful deal,” said Karlsmyr. “There was good momentum in the bookbuilding process and we felt positive and relaxed from the first minute.”

According to Karlsmyr, the decision to come to market had been made in the middle of last week, with the lead manager group chosen and briefed on Friday.

A lack of euro supply and infrequent issuance from Scandinavian financial institutions in general and Stadshypotek in particular paved the way for a successful deal, he added.

“Usually we are of the view that pricing is more important than size, but we also want to be able to leave something for the secondary market,” he said. “So we don’t like to squeeze pricing too hard, and this time, we feel that we managed that well.”

Karlsmyr said that the bank has no immediate plans to return to the market but that it wants to be a regular issuer.

“Absolutely, we will look at the market again,” he said. “Usually we try to come to the euro benchmark market one, two, three times a year.”