Stadshypotek, Svenska Handelsbanken’s covered bond issuer, added duration at a minimal new issue premium today (Monday) and against a backdrop of tight spreads versus SSAs, printing a €1bn seven year trade inside krona levels in the sixth Nordic euro benchmark in eight working days.

Five of the previous eight euro benchmarks that have been issued since 13 March – when the market reopened after the bout of Germany-induced volatility – have been from Scandinavia, including a €500m five year issue from compatriot LF Hypotek on Tuesday. However, this was all in shorter maturities and the last seven year from the Nordics was back in May 2024, a €1bn deal for DNB Boligkreditt.

“Everybody knows the five year part of the curve is the deepest, getting the broadest range of central banks and bank treasuries, and appeals to the masses,” said a syndicate banker at one of the leads. “We just felt that Handelsbanken is a name that can go a bit longer – having a really good investor following, its credit quality being best in class – so looked to test that.

“They also have a September 2030 on their euro curve, so a five year would not be ideal from that perspective.”

The new issue represents rare long-dated Swedish supply, being the longest euro benchmark from the country since a €1bn seven year in September 2022, also from Stadshypotek.

“The Swedish market is typically capped at around five years,” added the lead banker, “so this gives them a bit more duration, and the pricing is better than in kronor, too, so it ticks both those boxes.”

Leads BNP Paribas, HSBC, SG, Svenska Handelsbanken and UBS opened books this morning with initial guidance of the mid-swaps plus 43bp area for a euro benchmark-sized March 2032 issue, expected rating Aaa. After around two hours and 20 minutes, the spread was set at plus 40bp on the back of books above €1.3bn, including €50m of joint lead manager interest. After around two-and-three-quarter hours, the size was set at €1bn (Skr11bn), with demand above €1.55bn, and the final book was above €1.45bn, excluding JLMs.

Although the tightening of 3bp from initial guidance to re-offer was lower than on recent euro benchmark issuance, the pricing achieved represented a minimal new issue premium, according to the lead banker.

“The spread to SSAs here is very tight – only 8bp back of where EIB priced earlier this month, which is a very slim delta,” he said. “And if you look at seven year covered bonds this year, only one has come tighter, and that was Berlin Hyp at 39bp.”

It is also the tightest seven year euro benchmark outside Germany since DNB’s May 2024 trade.

“So by those metrics, this looks pretty impressive.”

DNB’s 2031 paper was trading at around 38bp in the secondary market, while the Norwegian bank issued a €1.5bn September 2029 deal at 30bp on Thursday.

“The secondary market isn’t the most liquid, but if you take the DNB and don’t add any curve for extending from 4.5 to 5 years, and then add 7bp for the additional two years based on the shape of the tightest curve, Pfandbriefe, you get to 37bp,” said the lead banker. “But that’s the tightest relative value you can calculate, implying fair value at EIB plus 5bp, and I’m not sure investors would have bought into that.

“They probably looked at where we are versus SSAs, where we are versus the last seven year, and decided that the NIP was minimal.”

The pricing also contributed to the quantum and quality of the order book, according to the lead banker.

“A peak book of €1.55bn and final book of €1.45bn tells you that the quality of demand is very good,” he said. “Three or four weeks ago when the RV versus SSAs was a bit better, everyone was buying covered bonds – hedge funds and other fast money – but at these spreads, it’s more of a purist’s market, so the book was completely bank treasuries, official institutions, etc.”