SR-Boligkreditt extended its curve with a €500m 10 year covered bond on Monday and was rewarded for the positive-yielding deal with its tightest pricing versus its big compatriots, and SpareBank 1 SR-Bank’s Dag Hjelle told The CBR that the issuer was very happy with the deal.

Hjelle, head of treasury at SR-Boligkreditt parent SpareBank 1 SR-Bank, said the issuer decided to proceed with the transaction amid favourable spread levels.

“We didn’t want to go early in January,” he said, “so after updating our programme, and seeing that spreads were quite stable, we thought now was a good time to go.”

Leads JP Morgan, LBBW, Natixis, Nordea and Santander priced the €500m (NOK5bn) 10 year new issue at 8bp over mid-swaps on the back of over €900m of orders, after the book peaked above €1.2bn following initial guidance of the 13bp area for a benchmark-sized trade.

Hjelle said one reason the 10 year maturity was chosen was in order to offer a marginally positive yield (0.027%).

“There was the principle in itself of extending our curve to have a 10 year print out there,” he said. “We also saw the market was quite receptive at that point – it was a sweet spot – as we could price at a fair level, and it met good demand.

“I don’t think I’ve ever seen such a flat curve from seven to 10s,” he added.

Having priced the €500m print at plus 8bp, he said that in hindsight, a €750m-sized issue was available at plus 9bp or even 8bp, but the issuer opted for a higher quality book and the smaller size.

“The option to take half the book at plus 8bp was viewed at the time as the best option,” he said. “And we were happy with the deal as it went.”

Hjelle said that the deal priced through compatriot SpareBank 1 Boligkreditt’s curve.

“Their secondaries in nine years were at 9bp,” he said, “and we printed a 10 at 8bp, so that’s quite interesting.

“We’d been expecting this for quite a while,” he added. “We don’t see any reason for the spread differentials between ourselves and other issuers, such as DnB, in the covered bond market, so we’re happy to see that and very happy with the deal.”

He said that the 2030 issue, which was preceded by a €500m inaugural green covered bond in October 2019, and is its eighth outstanding covered bond overall, could be followed by another at some point in the funding year.

“Our pace is one to two deals in the euro market a year for covered,” he said. “This is the first, we cannot guarantee a second, but we will see.

“Eventually we could do another green bond,” he added. “We have enough eligible assets for green issuance in covered, as well as senior, so there will be more green issuance from us at SR-Boligkreditt going forward.”