Swedbank Hypotek attracted some EUR1.35bn of orders to a EUR1bn five-and-a-half year covered bond today (Thursday) that was priced 10bp through mid-swaps, setting a new post-crisis spread record for Sweden, even while prioritising size over price.

Leads Danske, Deutsche, Natixis, SG, Swedbank and UBS launched the August 2023 issue this morning with guidance of the mid-swaps minus 8bp area. After around one and a half hours, the leads announced that books had exceeded EUR1bn.

The spread was subsequently set at minus 10bp with books “well above” EUR1.2bn. The size was later fixed at EUR1bn with a book of around EUR1.35bn, including EUR20m joint lead manager interest.

“It looks like a healthy trade,” said a syndicate banker away from the leads. “EUR1.35bn is the biggest book we’ve had in the covered bond market for a couple of weeks now.”

A syndicate banker at one of the leads said the name and tenor had attracted good demand from bank treasuries in particular.

The deal is the tightest post-crisis euro benchmark covered bond from Sweden, surpassing the record of minus 8bp set by a EUR750m seven year for Stadshypotek in November and matched by a EUR750m seven year for Swedish Covered Bond Corporation (SCBC) on 22 January.

Nevertheless, bankers away from the deal suggested Swedbank had prioritised size over spread, and could have priced the deal tighter had their ambitions for size been lower.

“They could probably have gone tighter, but would have risked losing some of that book, and if you look historically Swedbank never print less than EUR1bn in the euro market,” said a syndicate banker away from the leads.

Swedbank issued two euro benchmark covered bonds last year, a EUR1bn five-and-a-half year (July 2022) issue in January and a EUR1bn seven year in April.

Bankers said the new issue paid a premium of 3bp-4bp versus Swedbank’s curve, seeing its July 2022s at around minus 15bp, mid, and May 2024s at around minus 12bp.

“That does look slightly generous compared to some recent trades,” said a syndicate banker away from the leads, “but those secondaries are trading quite tight.”

Some bankers suggested that investors might instead have been using as a comparable a recent EUR1.5bn five year issue for Norway’s DNB Boligkreditt, priced at minus 10bp on 16 January. The January 2023 issue was seen trading at around re-offer.

“You could argue that Swedbank could, or should, price inside DNB, but this is a different market to January and Swedbank still printed a big size,” said one.

The new issue is the second euro benchmark covered bond from Sweden this year, following SCBC’s EUR750m seven year, which was priced at minus 8bp and seen at around re-offer today.