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DNB SEK5.5bn FRN shows attractions of Swedish mart

DNB Boligkreditt yesterday (Thursday) issued a SEK5.5bn five year FRN that highlighted the increasingly favourable conditions in the Swedish krona covered bond market, according to syndicate bankers, who said it offered a saving of around 5bp versus euros.

DNB imageAfter announcing the mandate on Wednesday afternoon, leads Danske and DNB opened books for a five year floating rate note with guidance of Stibor plus 21bp, citing a minimum size commensurate with LCR Level 1B (around SEK5.5bn). After around an hour and 40 minutes, the spread was set at 21bp, and the deal was ultimately sized at SEK5.5bn (€532m, NOK5.61bn).

Syndicate bankers said the pricing offered roughly 5bp of savings versus euros and around 2bp versus Norwegian kroner.

“The Swedish market has been performing,” said a banker away from the leads, “so Nordic issuers have access to good funding – much better than in euros – and that no one can take away from them.”

Fixed rate krona benchmark paper from Svenska Handelsbanken issuer Stadshypotek was trading at 11bp over Stibor, he noted.

“If DNB can save 5bp when issuing 10bp wider than Handelsbanken,” he said, “a lot of other Swedes are saving up to 16bp versus euros.”

A lead banker said the deal was demonstrative of the attractions of the Swedish market, which has been relatively attractive for some time on the back of increased central bank buying.

“You’ve seen a market that has been tightening steadily for a while,” he said, “hence there’s interest to issue from the local community and also other Nordics.

“We haven’t seen any non-Nordic issuance in the SEK covered bond market this time around, but who knows? It’s happened before and could happen again.”

The deal could be considered a success, he added, as the most important feature was to reach LCR Level 1B eligibility with a minimum size of SEK5.5bn.

A week previously, on 20 August, compatriot SpareBank 1 Boligkreditt tapped a June 2020 green covered bond for SEK1bn at 18bp over, and the syndicate banker away from the leads noted that DNB had come 3bp wider than this, while the two Norwegian issuers would normally be expected to come more closely to each other.

However, the lead banker noted that the underlying market had widened 1bp-2bp since SpaBol’s issue and that DNB’s new issue was much larger than the tap and three months longer, saying that these factors explained the bulk of the 3bp difference between the pricing of the two trades. He nevertheless acknowledged that the green nature of SpaBol’s trade made a “smidgeon” of difference, thanks to the strong demand for green assets from the Swedish investor base.