Sweden’s Lackluster Bond Market May Be Nearing Tipping Point

(Bloomberg) -- Sweden's corporate bond market could be on the verge of an issuance rush as more investors and issuers find alignment over where to price deals.

Bankers say a slump in new bond sales by lower rated companies looks set to change with the likes of SKF AB now returning to a market that recently suffered its worst rout since the financial crisis.

On Tuesday the bearings manufacturer sold its first publicly syndicated krona offering in about 12 years. Order books on the 3 billion kronor ($321 million) two-tranche deal closed at more than 6 billion kronor, enabling the company to price the notes inside initial guidance.

In a further boost for the country's primary market, Tele2 AB and Ellevio AB were said to have hired banks for krona-denominated bonds on Tuesday.

“The market has been favorable in the past few weeks and we took the opportunity to go now before the summer,” SKF's Group Treasurer, Niclas Erlandson, told Bloomberg News.

“It's normally the strongest names that open up the market when you come out of a period of volatility,” said Marten Krakau, a debt capital markets banker at SEB, which is one of the lead managers on the SKF transaction alongside Handelsbanken and Nordea.

Krakau says that new bond deals from the likes of Volvo Group, Scania CV AB and SKF will spur issuance from other triple-B borrowers and could even “open the door” for unrated issuers.

“A large proportion of the Swedish market is made up of unrated issuers,” he said. “And we're hoping we can return to that mode, when we have both rated and unrated krona issuers.”

While the country's unrated bond sector has recently drawn criticism from the Riksbank over issues of price transparency and valuation, the SEB banker remains bullish on the market's overall prospects.

“We have now reached a point where both investors and issuers think that market levels are stable and attractive enough,” Krakau said.

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