Danske Bank sold a Eu1bn five year covered bond today (Tuesday) that a lead said “kick-started” more frequent issuance out of the bank’s C pool after changes to its programmes. Danish peer BRFkredit has meanwhile mandated a potential debut euro benchmark.

Danske Bank’s benchmark, which was issued out of its C (combined) pool, comes after the Danish bank announced changes to its cover pools in February.

Danske has under Danish legislation issued covered bonds off C and I (international) programmes backed by a mix of Swedish and Norwegian mortgages, with the I pool comprising only residential mortgages and the C pool a mix of residential and commercial mortgages. The bank announced that the I pool will in time become exclusively Norwegian, with Swedish assets from it being migrated into a new Swedish pool managed by a new mortgage institution under Swedish law. Meanwhile, the C pool will, until at least 2020, retain a mix of Norwegian and Swedish collateral.

“The C-pool is now earmarked for more frequent issuance, so this was a good way to kick-start that,” said a syndicate official at one of Danske’s leads.

Leads ABN Amro, BNP Paribas, Commerzbank, Danske and Natixis launched the five year issue with guidance of the 20bp over mid-swaps area, before revising guidance to the 18bp area after having taken over Eu1bn of orders. The deal was then re-offered at 17bp and the size fixed at Eu1bn (Dkr7.46bn), with the book closing at around Eu1.7bn.

“There was a good tightening in the price, with most people agreeing that this is the right level for the deal, and we had good participation, with all of the accounts you would expect in the book,” said the lead syndicate official.

Bankers at and away from the leads noted the deal offered a pick-up versus recent Swedish five year supply, after Stadshypotek and SEB priced Eu1.25bn and Eu1.5bn deals at 14bp over on 3 and 4 February, respectively. They also noted it offered a bigger premium than a Eu500m five year for Norway’s Sparebanken Vest, which was priced at 18bp last Wednesday and was seen as offering a premium of 3bp-4bp.

“This landing point is a bit back in terms new issue premium from the Sparebanken Vest, but I would hasten to add that this is a larger deal, and in terms of the spread it is wider than the earlier Swedish supply, but this is now a different climate, and Danske is, of course, a frequent issuer,” said the lead syndicate official.

Bankers noted that Danske has three outstanding issues from the C pool, one of which will mature on the new issue’s settlement date, with June 2020s seen at 9bp, mid. They said this implied a premium of 5bp for the new issue.

“At the start the pricing looked a little cheap, but they tightened it in well,” said a syndicate official away from the leads. “You’ve got to remember that Danske is a more frequent issuer than some of the natural comparables, so I think this in the end is not too cheap, and not too rich.”

The lead syndicate official suggested that Danske had also slightly paid up for the announced changes to its cover pools, noting that issuance from the C pool tends to trade with a slight pick-up versus issuance from the I pool, and suggested that an equivalent issue from the I pool would have today been priced at around 14bp. He said the pricing differential is due to some investors’ unfamiliarity with mixed commercial and residential pools, noting that this set-up is not replicated in many other European countries outside of Austria and Germany.

“Therefore issuance from the C pool does need a bit more of a lift from German investors,” he said. “But we found that.”

BRFkredit this morning announced a mandate for a series of investor meetings across Europe ahead of a potential inaugural euro benchmark covered bond issue. The meetings will commence next Monday (7 March) and conclude on Friday.

The deal will be a conventional euro benchmark rather than Danish-style match-funded issuance, with BRFkredit becoming only the second Danish issuer to go down that route after Danske.

The Danish mortgage credit institution – which is wholly owned by Jyske Bank – yesterday (Monday) announced that it will in future finance part of its mortgage loans under joint funding agreements with bonds denominated in euros.

“This action will reduce the annual refinancing of bonds denominated in Danish kroner and at the same time take advantage of the funding opportunities in the European bond market,” said Lars Waalen Sandberg, executive vice president at BRFkredit.

A lead syndicate official noted that BRFkredit has already issued euro-denominated paper in the senior unsecured market, with one benchmark outstanding, a Eu500m January 2018 fixed rate deal.