Nordea Kredit wrapped up three days of refinancing auctions of adjustable rate mortgage (ARM) bonds yesterday (Thursday), while BRFkredit and Nykredit finished today, with spread stability at tight levels and curve flattening flagged by market participants.

Nykredit Realkredit was auctioning interest rate-reset bonds from Monday of last week (18 August). Nordea Kredit’s auctions were smaller, and the mortgage credit institution duly held auctions over a shorter period, from Tuesday to yesterday, offering Dkr18.9bn (Eu2.54bn) of one year ARM bonds, Dkr570m of two year bonds, Dkr4.38bn of three year bonds, and Dkr600m of five year bonds.

Nykredit, meanwhile, offered some Dkr76bn of ARMs paper, the majority of which was one year bonds. Nykredit’s only sale of five year bonds during the auctions was today (Friday).

Uffe Kalmar Hansen, senior covered bond analyst at Nordea Markets, highlighted a tightening of spreads and yields as notable aspects of the auctions.

“Nykredit’s auctions are probably the most representative, as they’ve been going on for nine days now, and the spreads there have tightened, from 16.6bp over Cita to 16.2bp today,” he said yesterday. “The spreads on Nordea one year ARM bonds were unchanged over the three auction days in my opinion, but if you look at where they were trading on the last day before the auction season started there was a tightening.”

Nordea one year ARM bonds were auctioned at a spread of 15.2bp over Cita on Tuesday, the first day of its auctions, and 15.6bp over yesterday, according to Hansen. The mortgage credit institution also auctioned three year bonds on three days, and the spread on these tightened slightly, from 7bp through three months asset swap to 8bp through, he said.

The yield on Nordea’s one year bonds increased from 0.233% on the first day to 0.243%, while the yield to maturity on Nykredit’s fell from 0.28% on 18 August to 0.25% today, according to the issuers.

Lars Mossing Madsen, chief dealer at Nykredit, said that the spread on Nykredit’s one year bonds has been “extremely stable” over the course of the auctions, on average 15bp over Cita, with expectations before the auctions having been for a spread of 16bp-18bp over.

Nykredit’s auctions started with very high bid-to-cover ratios of around 4, and although the oversubscription levels were lower in the past few days – at a low of 2.51% today – this is a normal trend and has not affected the swap or yield levels, according to Madsen.

“The tightest level was at the beginning of this week and then when the bid-to-cover fell a bit we lost maybe 1bp, but the impact has been marginal,” he said.

The bid-to-cover on three year ARM bonds, meanwhile, shot up from 4.5 on the first day of their being auctioned, on Tuesday of last week, to 6.77 at the last sale yesterday. A sole Nykredit auction of five year paper today was 4.09 times covered at a yield of 0.70% and spread of 13.6bp through swaps, which Madsen said was slightly better than secondary levels implied ahead of the sale.

“The three and five year auctions are done, and went very well,” said Madsen. “The yield curve flattened, and we’ve reached the tightest level between one year and three year bonds and one and five years, so for borrowers it is an interesting time to consider three and five year ARMs.”

He noted that the differential between one and three year ARMs for borrowers had narrowed from 52bp to 10bp this year, and the differential between one and five years from 120bp to 36bp.

Nykredit also sold Skr10.5bn (Dkr8.52bn, Eu1.14bn) of one year bonds today (see separate article).

A BRFkredit official said that its auctions of one year ARM bonds have gone well, as it has refinanced at around the same level as Nordea and Nykredit, with the yield at around 0.26%, and that sales of new RTL F bonds have also been successful.

DLR Kredit will be holding auctions from Tuesday to Friday next week.