Nykredit Realkredit will kick off the Danish March covered bond auction season tomorrow (Thursday), as it begins to sell Dkr93.5bn (Eu12.5bn) over a two week span to 17 March.

The majority of Nykredit’s issuance, Dkr79.9bn, will come in the form of one year bullet bonds, with Dkr13.6bn of that amount being issued in euros. The remainder of the sales will be in three and five year maturities.

Nykredit first vice president Lars Mossing Madsen said the institution expects a yield-to-maturity in the coming auction of around 1.85%-1.9%. That compares with 1.52% in December and 1.59% last March.

Lars Mossing Madsen

“The higher yield in the coming auction is because the general yield environment has risen since December,” he said.

Madsen predicted strong demand for Nykredit’s covered bonds.

“We saw strong issuance in the first four, five March auctions and I can’t see there being a huge difference this time to those then,” he said.

Realkredit Danmark, a subsidiary of Danske Bank, will auction Dkr26.6bn and Eu408m in one year bullet bonds from 9 to 15 March.

Christian Riemann-Andersen, senior analyst at Danske Bank, said that he expects the upcoming auctions to be “business as usual”.

“The auction of new bonds will be well matched by large redemptions and there seems to be plenty of liquidity to support the auctions,” he said.

Riemann-Andersen said that Danish mortgage lenders have in recent years begun to spread auctions throughout the year because of the increasingly large December auctions.

“Nykredit was the first to supplement the December auctions with auctions in March and September back in 2005 and others now follow, including Realkredit Danmark,” he said.

Nordea Kredit will offer their bonds on 9 and 10 March. According to Jacob Skinhøj, chief analyst at Nordea Kredit, the institution holds a market share of around 15% of Danish covered bonds but will be responsible for 10% of the March issuance.

“I think this auction will be well bid,” he said, adding that a spread of around 57bp over Eonia is expected.

BRFkredit has no plans to participate in the upcoming auctions but will re-enter the market place in October and December.

“We only own about 10% of the market,” said BRFkredit group treasurer Anders Hansen, “so it’s a conscious decision to spread it out over fewer auctions.”