Denmark

The new Danish covered bond law, which comes into effect on April 1, is a more complicated structure where a maturity extension is possible under limited circumstances. Because the new bonds carry a higher risk compared to the existing legacy bonds, issuers looking to sell bonds face increased execution risk. The Cover spoke to various buy and sell-side market participants to gauge their thoughts.

A Danish covered bond legal amendment, expected to come into force on April 1, is credit positive for Danish mortgage banks, Moody’s said on Monday.

Denmark’s efforts to improve its covered bond law and reduce refinancing risk for its banks is a step in the right direction, Standard & Poor’s said on Wednesday. However, refinancing risk will continue to be a problem.

The European Commission must ignore the counsel of the European Banking Authority, which has called for covered bonds to remain as level 2A assets within Basel III’s Liquidity Coverage Ratio. It must instead base its decision, due by June 30, on the EBA’s analysis that covered bonds are as liquid as sovereign bonds and good enough for Level 1 of the LCR.

Average spreads for Danish covered bond auctions, which finished on Wednesday, hit record lows, Danske Bank research said on Thursday. The auctions were heavily influenced by the government’s amended proposal to extend the maturity of bonds from next year.

The Danish government's call for a mandatory maturity extension on covered bonds would greatly reduce liquidity risk, but raises questions about its implementation, Fitch said on Wednesday.

Commerzbank has returned for its fourth covered bond deal of the year, and the second off its new mortgage platform. It announced the €500m no grow deal on Monday, ahead of Abbey National Treasury Services launching its own deal (see other story).

Nordea’s decision to revive traditional callable bonds reduces refinancing risk and strengthens cover pool quality, Moody’s said on Wednesday.

The European Banking Authority (EBA) on Monday published the final draft of its Regulatory Technical Standards (RTS) on close correspondence between the fair value of an institution's covered bonds and the fair value of its assets. The document will put an end to an accounting trick that allowed banks to make their capital position appear better than it was.

The Danish auction season kicks off this week with Nykredit’s scheduled to start on Thursday and the other Danish banks expected to follow. The auctions will be notable for offering a new type of longer dated product that should help to address rating agency concerns over asset liability mismatches and help fulfil Basel III’s Net Stable Funding Ratio.

Hard work rather than a change in terminology led to the surge in interest for Nykredit Realkredit’s latest senior secured deal, an official at the issuer told The Cover on Tuesday. Almost 140 accounts produced its biggest order book yet for a senior secured deal.

Nykredit Realkredit launched a euro benchmark junior covered bond on Monday after marketing the deal as a senior secured transaction. This approach helped draw traditional covered bond buyers and credit accounts into the deal, which was priced at half the spread and with twice the orders that its last outing in the rare asset class achieved.