Starting on Tuesday 13 March (depending on market conditions) Kommuninvest is set to introduce a new benchmark loan (SE0010948240) that matures on 13 November 2023, and will become the second longest benchmark loan issued in SEK by Kommuninvest. The coupon rate is set to 1%. Kommuninvest is targeting an initial volume that reaches benchmark size (SEK3bn).
The corresponding government bond in the same segment gives a marginally positive yield close to 0.20%. By and large the hunt for yield among investors remains an important theme. Also, as Kommuninvest bonds have cheapened relative to covered bonds for some time we expect the loan to be relatively well-received.
Pricing
K2311 matches SGB1057 (also 13 November 2023) on the government curve. There are a few covered bonds outstanding in this segment, For instance NDH516 (September 2023) trading 15bp above the level we expect the new K2311 to trade.
Based on the market pricing on 12 March at 15:00 CET, we think a reasonable pricing for K2311 is between 19.5-20.5bp above K2302. In the charts below, we have assumed a spread of 20bp above K2302. In matched ASW terms, this means a spread around 10.8bp (+11bp in True spread), assuming curves to be correctly priced.
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