Danish issuers were able to refinance ARMs at the tightest spreads of the year in their latest auctions last week thanks to strong demand boosted by high redemptions, and the market was unaffected by post-Trump volatility and an IT problem that forced RD to cancel a day’s sales.

Realkredit Danmark (RD) and BRFkredit opened the latest season on 17 November, each selling floating rate note (FRNs), with Nykredit joining the FRN sales on 18 November. DLR Kredit and Nordea Kredit then joined the other three Danish mortgage credit institutions in adjustable rate mortgage (ARMs) bond issuance, with the bulk of the sales concluding last Friday (25 November).

The ARMs refinancings last week included some Dkr90bn (Eu12.1bn) of krone-denominated sales, with Eu2.22bn of euro-denominated bonds also on offer.

“All in all, the bid-to-covers and the levels we were reaching in the auction were satisfying, and that seems to be the case for everyone else in the market,” said Lars Mossing Madsen, chief dealer at Nykredit.

Market participants noted that the smooth sales were in contrast to more turbulent conditions in the wider market in recent weeks, with volatility persistent since the US election.

“That did not affect neither investor interest nor the levels we were reaching,” said Madsen. “It was business as usual.”

Uffe Kalmar Hansen, senior analyst at Nordea, noted that issuers were able to achieve the tightest spreads of any of the auctions so far this year.

“If we compare levels with the rest of the year, they are also extremely tight,” he said. “What we’ve seen here in the last few days is that there’s been a little widening, as you’d expect to see, but focussing on the auctions themselves the spreads are the tightest we’ve seen this year.”

Market participants also noted that there was little variation in the levels achieved by the different issuers.

“In previous years, for example, BRF was sold a little cheaper,” said Hansen. “But this year spreads have been very much in line across each name.”

The success of the auctions was attributed in part to the high level of redemptions compared to relatively low supply, with some Dkr245bn of bonds redeeming versus the Dkr148bn (Eu19.9bn) of supply.

“Traditionally the November auctions have been huge, and were five to 10 times bigger just a few years ago,” said Madsen. “Due to the recent changes these auctions have been much smaller, with people moving into longer maturities and into the floater market.

“The amount of bonds expiring was therefore much higher than the amount being issued, so that was supportive.”

The demand for FRN issuance was also deemed encouraging, with investor interest higher than in previous years. Madsen said Nykredit’s sales were well received.

“They definitely went much better than the FRNs we issued last year, and both met our expectations in terms of the spread,” he said.

The only hiccup in the auctions came on Monday of last week (21 November), when Realkredit Danmark cancelled three planned auctions “due to IT problems”. The issuer completed the next four days of auctions as planned, but with changed volumes in four ISINs, to keep the total auctioned amount unchanged.

The cancellation was an isolated incident, bankers said, and had no impact on RD’s later issuance or the wider market.

“It seems like it was a bit of a non-event,” said Hansen. “Making the later auctions larger solved the problem, and there was no harm done.”