DNB Boligkreditt priced the tightest ever Norwegian euro benchmark covered bond today (Thursday), a Eu1.5bn seven year that, despite the record spread, attracted strong demand of around Eu2bn, allowing the issuer to print a larger deal than initially expected.

Leads BNP Paribas, DNB, NordLB, UBS and UniCredit went out with guidance of the mid-swaps minus 5bp area this morning. Guidance was later revised to the minus 8bp area, before the spread was set at minus 9bp and the size at Eu1.5bn (Nkr14.2bn). The book closed at around Eu2bn.

The deal is the tightest euro benchmark covered bond from Norway, according to syndicate bankers at the leads. Bankers noted that few euro benchmarks from Norway have been priced through mid-swaps, and that a Eu500m seven year issue for SR-Boligkreditt on 26 September, the most recent deal from the country, was priced flat to mid-swaps.

“It was an opportunistic trade, with the issuer looking at how strong recent trades have been and where spreads currently are,” added a syndicate banker at one of the leads. “There was a target of printing around Eu1bn at these levels, but we were surprised to the upside by the demand available in this part of the curve.

“If you look at the recent longer dated trades, which have been similar trades in that they are opportunistic in trying to lock in attractive spreads, then sizes have been smaller, in the Eu500m-Eu1bn context. Clearly, there is much more depth in the five to seven year part of the curve.”

The non-CBPP3-eligible deal is only the second euro benchmark of as much as Eu1.5bn since the summer break, with Bank of Montreal having sold the other, a long five year on 19 October.

A banker away from the deal said the strong demand for the trade, despite the tight spread, reflected market conditions and the strength of the DNB name.

“It is a top tier name that investors like,” he said. “And while the spread looks tight, there is at least some minimal new issue premium on offer over secondaries.”

The deal was deemed to have offered a new issue premium of 1bp-2bp, with bankers seeing DNB Boligkreditt April 2023s trading at around minus 14bp, mid, and September 2026s at around minus 10bp. SR-Boligkreditt’s recent October 2024s were seen at around minus 6bp, mid.

The new issue is DNB Boligkreditt’s second euro benchmark issue of the year, following a Eu2bn five year in January.