Sparebank 1 Boligkreditt and DnB Nor Boligkreditt each sold Nkr1bn (Eu129m) covered bonds on Tuesday, with Sparebank 1 targeting insurance companies with a long dated fixed rate issue and DnB Nor responding to demand for liquidity buffer-eligible notes from bank treasuries with a floating rate note, according to a syndicate banker.

Sparebank 1 priced a Nkr1bn July 2022 issue at 55bp over mid-swaps. The bonds were sold at par and came with a 5% coupon aimed at insurance companies, said a syndicate official at one of leads DnB Nor Markets and Swedbank. The transaction followed a back-up in rates of almost 20bp, he added.

A Nkr1bn seven year floating rate note for DnB Nor was priced at 55bp over three month Nibor, and was sold in reaction to general demand for floaters from bank treasuries seeking to fulfil new liquidity ratio requirements, according to the syndicate banker.

A shortage of government securities in the Norwegian market means that the country’s banks could face difficulties in complying with short term liquidity buffer requirements – the Liquidity Coverage Ratio (LCR) – under proposed Basel III rules. Covered bonds are allowed to make up 40% of Level 2 assets under the LCR, subject to a 15% haircut, if they meet certain criteria for market depth and liquidity. Countries lacking Level 1 assets – mainly government bonds – could, however, be allowed to come up with alternative arrangements.