Danske Hypotek is expected to launch its inaugural Swedish krona benchmark covered bond soon, after the new Swedish issuer of the Danish group released the terms of its first deal, a December 2022 bond that an analyst forecast could be priced at a “relatively small” premium to comparables.

The Swedish Danske subsidiary met with investors in March to discuss its issuance plans and had initially been expected to issue shortly thereafter. However, it was not until late June that it announced that it had received relevant regulatory approval from the Swedish FSA (Finansinspektionen).

Danske Hypotek has now released plans for a 1% December 2022 debut benchmark (DH2212) and it is expected to launch the deal soon.

Danske’s cover pool size in Sweden is around Skr30bn (Eu3.2bn, Dkr24bn) and, according to SEB chief covered bond and FI market strategist Charlotte Asgermyr, when smaller issuer LF Hypotek was the last new entrant into the benchmark market, in 2006, it paid a 5bp premium versus Svenska Handelsbanken subsidiary Stadshypotek. Danske Bank has the same ratings as LF Bank, A1/A from Moody’s and S&P (Danske Hypotek’s covered bonds are expected to be rated AAA by S&P).

Asgermyr now expects Danske’s first Swedish benchmark to be priced at a relatively small premium to LF Hypotek and Stadshypotek. She noted that demand for 2022 covered bonds has been good recently and that LF Hypotek currently trades at the same level as Stadshypotek.

“If the bond is launched through syndication, we expect initial guidance to be 4bp-5bp above Stadshypotek and LF Hypotek,” said Asgermyr. “However, we would not be surprised if the final price would tighten in to 2bp-3bp above.”

Danske, Handelsbanken, Nordea, SEB and Swedbank are dealers on the covered bond programme.

Photo: Danske office, Stockholm; Credit: Danske/Philipp Gallon