DNB Boligkreditt sold a Eu500m seven year floating rate covered bond today (Friday), building on reverse enquiries to open a new FRN maturity after having tapped a five year through 2014, with the end result attractive, according to an official at the issuer.

Thor Tellefsen, senior vice president and head of long term funding at DNB, said that the deal was based on some large reverse enquiries that came in after Stadshypotek sold a Eu1.25bn seven year fixed rate benchmark at 2bp through mid-swaps on Monday – a level that set a post-crisis tight for a non-Eurozone seven year euro benchmark. In response to the reverse enquiries, DNB did not want to issue a benchmark, but said that it would be open to doing a smaller floating rate note, according to Tellefsen.

The deal, led by BNP Paribas and Deutsche Bank, therefore started as something of a club deal with a few investors and grew from there, he said – the original plan was to issue Eu300m, but that it soon became obvious Eu500m was possible with orders coming in on top of the reverse enquiries, so the size was increased to that amount. However, a further request to up the size to Eu750m was turned down.

“We are already pre-funding for next year,” said Tellefsen, “and there is only a certain amount that we can do.”

The FRN comes after DNB progressively through the year tapped a Eu50m five year FRN that was launched in January up to Eu1bn last month. Today’s issue was priced at Euribor plus 10bp, which Tellefsen said was equivalent to a fixed rated benchmark level of 3bp through mid-swaps.

“We are very pleased with it,” he said.

He said that a level of around 10bp was anticipated from the start and that the price was not tightened even when the further demand came in.

According to Tellefsen, DNB’s FRN issuance has been driven by bank treasury demand, for whom the product is naturally attractive – although he said that today’s deal also included a chunky order from a large fund manager.

“I think FRNs will be coming a little bit back into the covered bond market and I wouldn’t be surprised to see another issuer follow us, although it remains to be seen to what extent there will be issuance.”