Swedbank and UBS tapped the US dollar market yesterday (Thursday) with benchmark covered bond issues on the back of attractive euro-dollar arbitrage and conditions more amenable to new issue execution than the euro primary market, according to syndicate bankers.

The two European issuers were attracted by a dollar market that looks much more favourable than euros at the moment, both in terms of demand and pricing, said one.

Swedbank Hypotek launched a $1bn (Eu772m) five year issue via leads Bank of America Merrill Lynch, Barclays, Deutsche Bank and JP Morgan.

Initial price thoughts were set in the 45bp-48bp over dollar mid-swaps area, then guidance at 46bp over, where the deal was re-offered. The new issue attracted more than $1.6bn of orders, according to a lead syndicate banker.

The syndicate banker said that at 46bp over mid-swaps the deal offered 1bp or 2bp new issue premium versus Swedbank’s outstanding dollar curve.

Swedbank’s last dollar deal was a $1.5bn five year launched in March 2012 and priced at 105bp over mid-swaps.

Another syndicate banker away from the leads said that 46bp over dollar mid-swaps was equivalent to 5bp over euro mid-swaps.

“This looks like a pretty attractive funding level,” he said.

Recent deals from Nordic issuers in the euro market were priced in the low double-digits range, with a Stadshypotek Eu1bn five year last week having pricing widened from initial price thoughts in the low single-digits over mid-swaps area to a re-offer of 14bp over.

Swedbank’s new dollar deal was the second Nordic dollar covered bond issue of the year after DNB a week earlier placed a five year transaction at 48bp over mid-swaps that was upsized from $1.5bn to $2bn following strong investors demand.

A syndicate banker away from the leads said that pricing of 46bp over mid-swaps was a good result for Swedbank in comparison with DNB, but noted the difference in size that the two issuers managed to achieve.

A lead syndicate banker said that Swedbank’s new deal was priced 1bp or 2bp over the level where DNB’s 2018 issue was trading yesterday.

The issue was equally split between North America and European accounts. Fund managers, official institutions, and insurance companies and pension funds took one third each, said a lead syndicate banker.

UBS launched a $1.25bn three year deal that attracted $1.6bn of orders and allowed the issuer to save some 10bp compared with where a euro deal could have been priced, according to a lead syndicate banker.

Leads Barclays, Lloyds, RBC, Santander, UBS and Wells Fargo set initial price thoughts in the low 30s, guidance at 30bp-32bp over dollar mid-swaps, and the re-offer at 30bp.

A syndicate banker away from the leads put the equivalent of 30bp over dollar over mid-swaps at around 10bp through euro mid-swaps.

“Sub-Libor deals in euros have never gone very well, so it was a good choice for UBS to go for a dollar deal,” he said.

A lead syndicate banker said that the issue came with virtually no issue premium considering UBS’s outstanding dollar curve, with existing 2015s trading in the high teens, and existing 2017s trading in the low 40s.

“Such a low level of new issue concession can no longer be achieved in the euro market,” he said.

Some 48 accounts participated in the transaction. North America was allocated 80% and Europe 20%. Managed funds took 40%, banks 27%, central banks 27%, insurance companies 4%, and private banks 3%.

Another syndicate banker away from the leads had questioned UBS’s decision to come to market on the same day as Swedbank, suggesting US investors might have found the Nordic transaction more attractive and also preferred the more usual five year tenor of the Swedish issuer’s deal.

A lead syndicate banker said that the positive outcome of the transaction testified that the dollar market has sufficient capacity to absorb two such covered bond deals and the UBS transaction did not suffer from the competing supply.