A $1bn five year Swedbank covered bond on Thursday was prompted by positive feedback from US investors and the contrasting fortunes of recent euro and dollar Nordic benchmarks, according to its issuer’s head of funding, but the Swedish issuer could return to euros later this year.

Ulf Jakobsson, head of funding at Swedbank

Leads Bank of America Merrill Lynch, Barclays, Deutsche Bank and JP Morgan priced the deal at 46bp over dollar mid-swaps on Thursday, after having gone out with initial price thoughts in the 45bp-48bp over area.

The $1bn (Eu770m/Skr6.47bn) issue tightened some 3bp in the secondary market on Friday, according to Ulf Jakobsson, head of funding at Swedbank Hypotek.

He told The Covered Bond Report that the decision to tap the dollar covered bond market was driven by several factors. Swedbank had recently updated its dollar covered bond documentation and wanted to make the most out of the window of opportunity that opened in the dollar market after that, said Jakobsson.

The Swedish issuer also had received positive feedback from US investors that made it confident of the positive outcome of a dollar deal, he said, and favourable cross-currency basis swap levels made a dollar deal look attractive versus Swedish kronor or euros.

“The deal was priced well inside where a euro issue could be priced today,” he said.

The outcomes of recent deals for DNB in dollars and Stadshypotek in euros were also taken into account in the decision to tap the dollar covered bond market, according to Jakobsson.

“The positive result of DNB’s recent five year transaction was encouraging as it showed that there are good levels of demand for Nordic covered bond issues in the dollar market,” he said.

“The less positive outcome of Stadshypotek’s recent five year transaction also contributed to our decision to go for a dollar issue rather than a euro one.”

The deal came after DNB placed a well received five year issue in the dollar market on 14 March, while in euros Stadshypotek launched a five year issue on 12 March where pricing had to be widened some 5bp from initial price thoughts.

Norway’s DNB priced its $2bn five year issue at 48bp over dollar mid-swaps, increasing it from $1.5bn following strong investor demand. Sweden’s Stadshypotek priced its Eu1bn five year issue on at 14bp over euro-mid-swaps, some 5bp wider than initial price thoughts.

Jakobsson said that the new issue will probably be the only dollar deal for Swedbank this year given limited funding needs. However, he said that Swedish issuer could be looking at the euro market after the summer, noting that Swedbank’s last euro deal was in August 2011.