SEB launched its equal-largest euro benchmark covered bond yesterday (Thursday), having been encouraged by a series of successful deals to move immediately after exiting a silent period, and SEB’s John Arne Wang said signs of improvement give reason to be hopeful for the covered bond market.

Successive new issues earlier in the week from CaixaBank, BPCE and Swedbank each attracted over Eu2bn of demand before SEB – as well as CM-CIC and Hypo Tirol – entered the market yesterday, and bankers had said that these confirmed that investors have been returning to the covered bond market after weeks of mostly lacklustre demand.

Skandinaviska Enskilda Banken (SEB) exited its silent period yesterday, and John Arne Wang, head of funding and liquidity management at SEB, said that, having observed the improvement in the covered bond market this week, the issuer had been keen to move as quickly as possible.

“We normally might be a little slower getting out of the starting blocks following results,” he said. “But after the market showed positive signs over the last few days, it was apparent to us that this week would work well.”

Wang added that he felt opportunities for issuance will be more limited next week, when some German areas will mark the Carnival holiday.

“Our transaction today – along with Swedbank’s transaction and the other transactions this week that have worked well – should be a positive signal for the covered bond market,” he added. “Clearly, investors are returning to the market because relative value has improved.

“There has been a lot of negative comments about secondary liquidity, which is admittedly not great, and the functioning of the market, but today I felt surprised to the positive side, and that gives me reason to be more hopeful going forward.”

SEB AB leads Crédit Agricole, Deutsche, ING, SEB, UBS and UniCredit launched the five year Swedish covered bond with guidance of the 18bp over mid-swaps area, before moving to guidance of 15bp plus or minus 1bp on the back of books over Eu2bn. The deal was then re-offered at 14bp and the size set at Eu1.5bn (Skr14.1bn). The book closed at over Eu2.4bn with over 100 accounts.

Banks bought 50% of the deal, fund managers 19%, insurance companies and pension funds 15%, central banks and official institutions 13%, and others 3%. Accounts from Germany and Austria were allocated 46%, the Nordics 20%, the Benelux 9%, the UK 7%, Asia 5%, France 5%, and others 5%.

The deal is SEB’s joint largest international covered bond issue, alongside a Eu1.5bn three year printed in 2008.

“The result overall is a very positive one,” said Wang. “If you go back just a few days, the market indicated more to the high teens for a five year transaction.

“Given we now managed to get positive momentum and price a bit more at the tight end of what we thought was the possible range, it is definitely a good outcome.”

A syndicate official at one of SEB’s leads said the deal had been trading 1bp tighter by yesterday’s close.

Wang added that euro funding levels currently compare favourably to those available in the domestic market.

“It is not significantly cheaper, we are talking marginally cheaper, but there is also somewhat lower execution risk at the moment,” he said. “The domestic market is functioning, but it is not functioning as it has in the past, partly thanks to the impact of negative interest rates.”

Wang said SEB might issue one more euro benchmark covered bond “much later” this year, depending on developments in the domestic market.

“With today’s transaction we are well on the way with our mortgage cover pool financing, having already financed approximately one-third of all our maturities this year,” he said.