Association of Swedish Covered Bond issuers

The Association of Swedish Covered Bond issuers (ASCB) is the voice of the Swedish covered bond industry.
The Swedish Covered Bond Issuance Act enables Swedish banks and credit market enterprises, which have been granted a specific licence by the Swedish Financial Supervisory Authority to issue covered bonds secured by a pool of mortgage credits and/or public sector credits.
There are eight issuers of covered bonds on the Swedish market: Handelsbanken/Stadshypotek, Landshypotek, Länsförsäkringar Hypotek, Nordea/Nordea Hypotek,  SBAB/Swedish Covered Bond Corporation, SEB, Skandiabanken, Swedbank/Swedbank Hypotek.
The total value of covered bonds outstanding was at the end of the fourth quarter 2015 EUR 221,9 billion an increase compared to Q4 2014 when the value was EUR 209,8 billion.

An introduction to the Swedish market

The Swedish covered bond market has a long history starting with the first establishment of a mortgage bank in 1861. This marked the start of the use of long bond issuance for financing of mortgage and public loan books. The mortgage bond market developed further after the deregulations of the financial markets during the 1980's where the formal standards for market making and issuance formats, the benchmark tap-market largely in place today, were established. The domestic bond market has withstood the external shocks of the last decades, including the Nordic financial crisis in the early 90's, the LTCM crisis, the Asian and Russian crisis and the 9-11, by remaining open and providing functionality to issuers and investors in terms of two-way pricing on outstanding benchmarks including repos

The tap issuance format

The key distinction of the Swedish domestic covered bond market is the tap issuance format via contracted market makers. It allows issuers on, a frequent basis, to tap the market in small to medium sizes. These taps can be made on a daily basis if needed with a settlement and documentation structure that is highly efficient. All transactions are executed via markets makers supported by separate market maker agreements regulating terms of the trades such as size, bid-offer spreads, repo functionality of outstanding benchmarks, communication to the market and remuneration to the dealers. For issuers the tap market means easier asset and liability management through the ability to match assets and liabilities on a small scale without having to fully resort to infrequent, and sometimes uncertain, benchmark issuance as is common in the international market.

The obligation of the market makers to quote two-way pricing arises when an issue reaches SEK 3bn in outstanding volume. The tap-issuance format, has proven very reliable in times of external shocks which is also evident by the increased used of taps by some issuers in the EUR market.