Stadshypotek priced a £300m three year FRN today (Monday), but bankers said it was unclear if further supply would emerge. Meanwhile, Caja Rural Castilla-La Mancha was on Thursday assigned a first cédulas hipotecarias rating.

Stadshypotek’s new issue is the first sizeable covered bond to be brought to market since Singapore’s DBS sold a $1bn (Eu912m) three year issue on 30 July, with supply subsequently drying up as the summer holiday period took effect.

Leads HSBC, Nomura and RBC priced the £300m (Eu424m, Skr4.067bn) three year FRN at 28bp over three month Libor, in line with initial price thoughts, with books closing above £300m.

“The price is a good level relative to other sterling transactions that we’ve seen, and a good level versus the other currencies they could look at,” said a syndicate official at one of the leads. “Overall, this is a good opportunistic trade.

“It was reactive to the market and a good result.”

Syndicate officials both at and away from the leads noted that recent £400m three year FRNs printed by Royal Bank of Canada and Bank of Nova Scotia, on 14 July and 28 July, respectively, were also priced at 28bp.

Syndicate officials away from the leads meanwhile said the new issue came around 2bp tighter than where an equivalent euro trade would have been priced. However, while citing the deal as showing that funding was available in sterling, they said it was not clear that other issuers would tap the market this week.

“While it is a decent result, it is not the most resounding endorsement for other issuers that they should follow Stadshypotek into the sterling market,” said one. “But that said, in a holiday market where it is hard to get focus it is encouraging that they managed to get a deal finished, and others might follow.

“You don’t rely on so much granularity in sterling trades as in euros, so if you can get a handful of investors on board a deal can still work well.”

Stadshypotek’s most recent benchmark covered bond was a $1bn five year issue sold in April, with its last sterling benchmark a £250m three year FRN in September 2012.

Meanwhile, syndicate officials said new euro benchmark supply was unlikely until next week at the earliest.

“In the euro market it is dead silent,” said one. “There are one or two issuers asking for updates, but no one is moving and it will remain a very quiet week.”

The syndicate official added that many participants were focussed on headlines regarding a potential US rate hike, but were mostly relaxed about the re-emergence of headlines regarding Greece.

“Even if there is some sudden good news, I do not expect that anyone will rush to come to the market,” he said. “Those that are at their desks are waiting, for now.”

Although no deal is believed to be imminent, syndicate officials said that a debut covered bond issue from Caja Rural Castilla-La Mancha was possible after the bank was assigned a provisional covered bond rating of Aa2 by Moody’s on Thursday, based on expected covered bond issuance of Eu700m.

“They are only a relatively small bank so you cannot expect anything from them quickly, and you would think they would have to go on the road ahead of any possible deal, because they are not well known,” said a syndicate official.

“However, it will be interesting to see what road they go down if indeed they do, whether it is a benchmark covered bond, something for ECB repo, or something in senior.”

The bank was also assigned a long term issuer default rating of BBB by Fitch on 1 July.

The CBR was unable to obtain a comment from Caja Rural Castilla-La Mancha before going to press.

Photo: Stadshypotek parent Svenska Handelsbanken