Riksbank’s Contested QE Plan Seen Boosting Company Bond Sales

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A controversial move by Sweden’s central bank to begin buying corporate bonds is providing a welcome boost for one of the country’s biggest dealmakers.

While the plan has faced a barrage of criticism ranging from a lack of transparency to its poor timing, debt arrangers at Svenska Handelsbanken AB expect Nordic borrowers to bring forward their issuance plans owing to favorable conditions fueled in part by the Riksbank’s intervention.

“There are certainly many borrowers who reflect on the recent strong prints and might approach the market even though they had planned to do so only later,” said Anders Holmlund, deputy head of bond origination and syndication at Handelsbanken Capital Markets.

Others plotting a return to the market include borrowers who sought short-term bank financing when the crisis shuttered the bond market temporarily, according to Holmlund.

The banker cites the example of the Swedish krona market, where Handelsbanken helped to arrange some of the region’s biggest bond sales in recent weeks, including three-part deals from Svenska Cellulosa AB and Volvo Treasury AB. On the demand side, there’s a broad general interest in industrials, with green and sustainable issuers drawing extra attention, Holmlund said.

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Holmlund says a “really big risk factor” for the current momentum in new bond sales would be a central bank signaling “a significant” reversal or slowdown in quantitative easing.

But should the Riksbank expand its corporate purchases beyond the stated amount of 10 billion kronor ($1.1 billion), further tightening in the pricing of bonds could follow, he said.

“It might also give issuers an extra incentive to get a public rating to get into the Riksbank’s scope,” Holmlund said, adding that rated issuers tend to benefit when it comes to pricing.

©2020 Bloomberg L.P.

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