Nykredit Realkredit got the new Danish auction season off to a flying start this (Monday) morning when its opening, Dkr7bn (Eu939m) sale of one year ARM bonds attracted some Dkr27.9bn of bids and achieved a level inside expectations.

The sale is the first of some Dkr130bn of auctions to refinance adjustable rate mortgages (ARMs) taking place until the end of next week (29 August), with Nykredit selling around Dkr66bn of one year ARM bonds overall.

Lars Mossing Madsen, chief dealer at Nykredit, told The Covered Bond Report that that the bid-to-cover of close to 4 was particularly notable given the high volume of bonds on offer on the first day of the sales. The bid-to-cover level is the highest for one year ARMs for Nykredit on the first day of an auction series in over a year, with it having achieved 3.44 a year ago and then 3.38 in November 2013, 2.06 in February, and 3.06 in May.

“It has gone extremely well,” he said, “even better than I had expected, and I had been quite positive.”

The bonds were auctioned at a spread of 14.8bp over Cita, according to Madsen, whereas he and other market participants spoken to by The CBR last week had forecast a wider level. Madsen said that, based on levels in tap sales, its July one year ARM bonds had been trading at 16bp over and, given that the new bonds are longer dated, he was expecting a level of 16bp-18bp over for the new issuance.

“But the interest generated a tighter spread,” he said.

The one year ARM bonds were priced at a yield of 0.28%, according to Madsen.

Nykredit also auctioned Dkr800m of two year bonds today at a yield of 0.31%. Today is the only day on which Nykredit is selling the two year bonds and it achieved a bid-to-cover of more than 5, said Madsen.

Analysts had expected the auctions to be supported by a shift away from ARMs financed by the one year bonds towards longer dated bonds and products with different interest rate structures in Denmark, resulting in less supply of the bonds.