DNB Boligkreditt launched a Eu1.5bn five year deal yesterday (Tuesday), two months after its last euro benchmark, but the issuer expects reduced issuance in euros this year as it has lower funding needs and is working towards going back to the dollar market, an official at DNB told The Covered Bond Report.

Thor Tellefsen

Thor Tellefsen, senior vice president and head of long term funding at DNB Boligkreditt, said he was very pleased with the outcome of the deal.

Leads Barclays, BNP Paribas, Credit Suisse and UniCredit set initial price thoughts in the low teens, refined guidance to the 13bp over mid-swaps area, and fixed the spread at 13bp.

Tellefsen said that at 13bp over mid-swaps the deal came around 1bp inside DNB’s secondary curve. The bonds tightened by around 2bp in the secondary market, he added.

Some 120 accounts participated in the transaction. Germany and Austria took 42%, the UK 28%, the Nordics 9%, France 7%, Asia and the Middle East 6%, Italy 2%, Spain and Portugal 2%, Switzerland 1%, and others 3%.

Banks were allocated 60%, fund managers 22%, central banks 14%, insurance companies 2%, and corporate 2%.

The deal was launched only two months after a Eu1bn 10 year transaction in November that the issuer at the time said replaced a trade that would otherwise probably come in January.

“DNB has lower funding needs, so we could have easily postponed this deal to February or March,” said Tellefsen, “but the market was very constructive yesterday and there was little supply so we said, why not?”

He said that there are two main reasons for the issuer’s reduced long term funding needs.

“Like most other banks we are growing less, and we are attracting a significant higher amount of deposits,” he said.

He added that high issuance in 2012 means that the issuer is ahead of others in terms of complying with a net stable funding ratio requirement being introduced under Basel III. DNB is the only issuer to have priced four euro benchmark covered bonds last year.

Tellefsen said that DNB Boligkreditt will be issuing significantly less in the euro covered bond market this year, and that the issuer is looking with increasing interest to the US dollar market.

“Last year DNB didn’t go to the dollar covered bond market,” he said, “but we are now in the process of refreshing our dollar documentation and we will aim for a couple of transactions there.”

Tellefsen said DNB will target the dollar market to diversify its funding sources and to appeal to the growing dollar covered bond investor community.

“The number of US dollar covered bond investors is significantly higher now than it was two years ago,” he said.

He pointed out that DNB is the only Nordic credit institution to have issued two $2bn covered bond transactions in the dollar market in 2010-2011.

“We gave the market a little rest when it hit turbulence during the second half of 2011 and first half of 2012, but we will tap it again this year,” he said.

Tellefsen said that a proposal by the Norwegian Financial Supervisory Authority to grant banking licences to Norwegian covered bond issuers to allow the institutions to directly access central bank funding would make them “even more attractive” for investors.

“This would represent a massive backing and even a much more secure position when it comes to accessing liquidity,” he said.

However, he added that this would probably not have an impact on Norwegian issuance volumes.