Danes’ enthusiasm for locking into ultra-low rates drove a long dated Danish benchmark above DKK100bn (€13.4bn) for the first time yesterday (Tuesday), as Nykredit Realkredit made its latest tap of what, the issuer believes, was already the largest covered bond ever, beyond the country’s short dated ARMs.

Initially issued in April 2019, the 1% October 2050 issue – which is callable and amortising – has been regularly tapped in line with demand for the respective mortgage loan under Denmark’s pass-through model.

“It has grown so huge because of all the refinancing activity last year that continued into the beginning of this year where our customers were refinancing their loans into 30 year fixed rate to take advantage of the super-low interest rates,” Morten Bækmand Nielsen, head of investor relations at Nykredit Realkredit, told The CBR.

He said he believes the issue to be larger than any other covered bond from any jurisdiction, with the exception of one year bonds refinancing adjustable rate mortgages (ARMs) that were previously the mainstay of the Danish market and where Nykredit and Realkredit Danmark (RD) both had DKK100bn-plus bonds outstanding.

“It’s not unusual that we build up these long dated bonds to €5bn or even €8bn equivalent,” he added, “but €13bn, that’s special. There are all these discussions about having benchmark sizes, creating jumbos of €1bn, etc, but here we have come up with something that is just many times bigger.”

As of yesterday, the outstanding had reached DKK100.192bn and the 1% 2050 issue was priced at 98.20 for a yield to maturity of 1.14%. As well as Danish buying, the bond has attracted interest from Germany, the US and Japan, according to Nielsen.

Nykredit Realkredit’s bond will be tapped further until it is superseded by a new long dated, 2053 benchmark and related mortgage loan on 1 September.

The feat comes after Nykredit Realkredit last week completed its latest quarterly auction season, which passed off “super-smoothly” in spite of the Covid-19 crisis backdrop, said Nielsen. The issuer sold some DKK37bn of paper, DKK21bn of it FRNs on Friday.

“Of course the spreads are higher than before the crisis,” said Nielsen, “but we had bid to covers of around 4 times on average.”

Nykredit held its auctions ahead of the holiday-shortened week, with a Danish public holiday tomorrow (Thursday), while RD, BRFkredit and DLR Kredit are holding auctions on Tuesday and Wednesday of next week (26-27 May).