Norway

Financial institutions have ramped up their sales of green debt at the start of 2021, as they look to take advantage of a quiet funding year by building out their environment, social and governance frameworks. This week, nearly all FIG euro issuance arrived in ESG formats.

The depth of demand for financial institutional funding in the domestic Scandinavian currency markets was illustrated this week with a series of covered bonds and subordinated new issues.

Golden Ocean Group, the Burmuda-registered oil and dry bulk shipping company, has completed a Nkr2.87bn ($338.5m) capital raising backed by Norwegian billionaire John Fredriksen.

The size of a covered bond liquidity buffer that protects investors against the risk of payment disruption should be an important risk consideration, but there is no incentive to play safe as regulatory and central bank treatment of the asset class play more pivotal roles in valuations.

Sparebanken Sør Boligkreditt’s covered bond drew more demand than competing deals issued by Berlin Hyp and Royal Bank of Canada on Tuesday, thanks to its more generous spread, shorter duration and favourable liquidity treatment.

DNB Boligkreditt issued a covered bond on Thursday that became its most oversubscribed covered bond ever, equalling the bank’s biggest ever order book. The deal, secured on green mortgages, was priced through its vanilla curve, clearly demonstrating the demand for covered bonds.

After issuing the first green covered bond, Sparebank 1 Boligkreditt has now become the first bank outside the UK to undertake a Sonia consent solicitation. The consent solicitation will increase pressure on other issuers outside the UK to follow suit.

Expected euro denominated covered bond supply from the Nordic region looks promising with Norway likely to prove a particularly bright spot. However, more cost-effective domestic funding in the Swedish market is expected to depress euro volumes there.

Norwegian banks are unsure how to press on with their minimum requirements for own funds and eligible liabilities (MREL). The Financial Supervisory Authority of Norway (NFSA) is asking them to meet their targets with subordinated liabilities only, but there is a chance the country will implement a softer set of EU rules next year.

This week's scorecard looks at the progress Nordic agencies have made in their 2020 funding programmes in mid-December, with some issuers also setting their targets for 2021.

A busy December for Nordic equity capital markets continued on Tuesday night with a Nkr2bn ($230m) transaction in Adevinta, the e-commerce and classified advertising company owned by Schibsted Media Group.

Kommunalbanken, the Norwegian funding agency for local governments, is reducing its 2021 funding programme.