Stadshypotek sold the first Swedish sterling covered bond yesterday (Monday), a reverse enquiry-prompted £250m three year FRN that an official at the issuer said was priced in line with domestic levels and a lead syndicate banker said came much tighter than euros.

Stadshypotek parent Svenska Handelsbanken, Stockholm

Around £300m of orders were placed for the floating rate note, which was the second covered bond in sterling this year and the first non-domestic public covered bond from a Swedish issuer since late September.

According to the leads, the deal makes Stadshypotek the first Swedish issuer to print a benchmark covered bond in the “four largest overseas markets”, after it made its Yankee and Kangaroo debuts in September 2010 and 2012, respectively.

Leads HSBC and RBS priced Stadshypotek’s deal at 23bp over three months Libor, the tight end of initial price thoughts and guidance of 23bp-25bp over. The re-offer spread is the tightest for a post-crisis sterling covered bond, according to a lead syndicate official.

Another banker on the deal said that the issue was priced through a £500m three year floating rate note for Australia’s ANZ Banking Group from 24 January that came at 27bp over, as well as being flat to through US dollars, and much tighter than euro fixed rate levels.

The euro equivalent spread is 10bp through mid-swaps, he said, with Stadshypotek May 2016s trading around flat.

Thomas Åhman, deputy head of treasury at Svenska Handelsbanken, Stadshyoptek’s parent, said that the re-offer spread is equivalent to 25bp over mid-swaps in Swedish kronor and that this is where the issuer would likely price a new three year covered bond in the domestic market.

“When we issue covered bonds our starting point is always the Swedish krona market,” he said, “as we need to swap proceeds back under the Swedish covered bond legislation and we have a large and deep domestic market we can tap.

“We had reverse enquiry interest at levels equalling Swedish krona levels for the same maturity, and this is what drove the transaction, and the pricing, too.”

The UK is one of Svenska Handelsbanken’s six “home markets” and, after already issuing senior unsecured in sterling, the issuer would like to reflect its business presence in the country via covered bond funding in the home currency, too, according to Åhman.

“Our long term view is that we would like to keep building our presence in sterling given our business there,” he said, “although it is more difficult to plan our international issuance in covered bonds than in senior unsecured given that there are so many parameters to consider.”

In this vein, he said that the issuer has no near term plans for euro or US dollar funding, but that it monitors these markets every day and things can change quickly.

Stadshypotek is happy to have been able to size its inaugural sterling covered bond at £250m, which is the accepted minimum benchmark size in the market, said Åhman.

“It was really good for us to print a benchmark, and the pricing was really important for us, too,” he said.

The UK and Ireland took 80% and Switzerland 20%. Fund managers bought 68%, banks 20%, and central banks and official institutions 12%.