In Essence by zhangyun

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									In Essence
SEB MERCHANT BANKING                                                                         24 June 2011




The Danish Bond Market
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Bo M. Andersen
                            Danish mortgage system undergoing changes=
+45 33177708
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                            RD terminates its collaborations with Moody’s
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                            =
 In Essence                                                                                                                       2

                       Danish mortgage credit undergoing changes =
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                       =
 Overview of Nykredit’s capital centres, size and recent rating status from Moody’s
                                                                                          Mortgage
                                                  Covered                                 loan debt                      TPI-
 Nykredit’s capital centres                     bond rating         Issuer rating         (DKK bn.)         TPI        Leeway*
 Nykredit Realkredit, Capital Centre D               Aaa         A1 (neg. Outlook)           310           High            3
 Nykredit Realkredit, Capital Centre E               Aaa         A1 (neg. Outlook)           584           High            3
 Nykredit Realkredit, General Capital Centre         Aa1         A1 (neg. Outlook)             6           High            4
 Nykredit Realkredit, Capital Centre G          Aa3 (RFPD)       A1 (neg. Outlook)            12           High            5
 Nykredit Realkredit Capital Centre C                Aa1         A1 (neg. Outlook)             7         Very High         5
 Totalkredit Capital Centre C                        Aa1         A1 (neg. Outlook)            82         Very High         5
 *) Latest Overview reports from Moody’s, published at the end of February 2011. From this a downward adjustment of the TPI-
 leeway with 1 notch has been made, for the capital centres included in Moody’s latest TPI adjustment from Very High to High on
 the 10th of June 2011.
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Calculation of the payment consequences of the different steps in the financing model.
                                           Existing                             New loans from H1 2012
   Loan type       Monthly net          Contribution       New RLT Capital       New 2-tier Capital    Weighted     Total
                     payment                 raise              centre                centre           payment    payment
                      (Current            (+0.2% in          +20bp (0-60%        +50bp bullet/+20bp               increase
                       setup)            contribution           Bullet)            Fixed interest
                                          Bullet/IO)
RTL1Y Ann              3,490                3,602                3,649                 3,722            3,667       177
RTL1Y IO               1,424                1,537                1,650                 1,819            1,692       268
5% 2044*               4,428                4,428                4,428                 4,498            4,446        17
5% 2044 IO*            3,213                3,329                3,329                 3,444            3,358       144
*) In the payment calculation for fixed interest loans we have used the coming 5% 2044/IO series
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In Essence                                                                                                                                                                                                                                                                    7

_ó=íÜÉ=kÉï=vÉ~ê=                                                                         Nykredit SDO Capital centre E
Ü~äÑ=çÑ=íÜÉ=pal=                                                                Outstanding Non-callable bullets by maturity year
^ojÛëÛäç~å=Å~å=
Ü~îÉ=ÄÉÉå=                           120,000                                                                                                                                                                                                                   120%

íê~åëÑÉêêÉÇ=íç=íÜÉ=
                                     100,000                                                                                                                                                 100%
åÉï=pal=Å~éáí~ä=                                                                                                                                 93% 95%
                                                                                                                                                         97% 98% 99% 99%
                                                                                                                                                                         99% 99% 99% 100% 100%

                                                                                                                                     90% 91% 91%
ÅÉåíêÉ=                               80,000                                                                   82%
                                                                                                                          85%
                                                                                                                                                                                                                                                               80%
                                                                                                    79%




                                                                                                                                                                                                                                                                      Acc. share (%)
                                                                                         75%




                         DKK mill.
                                                                              69%

                                      60,000                                                                                                                                                                                                                   60%

                                                                   45%
                                      40,000                                                                                                                                                                                                                   40%


                                      20,000                                                                                                                                                                                                                   20%
                                                        17%


                                          0                                                                                                                                                                                                                    0%
                                               Oct-11

                                                          Jan-12

                                                                     Apr-12

                                                                                Oct-12

                                                                                           Jan-13

                                                                                                      Apr-13

                                                                                                                 Oct-13

                                                                                                                            Jan-14

                                                                                                                                       Apr-14

                                                                                                                                                Oct-14

                                                                                                                                                         Jan-15

                                                                                                                                                                  Apr-15

                                                                                                                                                                           Oct-15

                                                                                                                                                                                      Jan-16

                                                                                                                                                                                               Apr-16

                                                                                                                                                                                                        Oct-16

                                                                                                                                                                                                                  Jan-17

                                                                                                                                                                                                                           Jan-18

                                                                                                                                                                                                                                    Jan-19

                                                                                                                                                                                                                                             Jan-20

                                                                                                                                                                                                                                                      Jan-21
                                                                                         Outstanding Non-callable bullets                                                           Acc. share (rhs.)
                                                                                                                                                                                                                                                                                       =
                    =
cìêíÜÉê=Ñ~îçìê~ÄäÉ=                 bñáëíáåÖ=àìåáçê=ÅçîÉêÉÇ=ÄçåÇë=Ñêçã=Å~éáí~ä=ÅÉåíêÉ=bK=
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                                         =
               Overview over Nykredit’s outstanding JCBs’, issued from capital centre E
                                                                                                                                                                                                                                                      Circulating
                                                                                                                                                                                                                   Rating                              amount
               ISIN                            Name                                                                         Currency                                Maturity                                      Moody's                             (DKK mn)
               DK0009774705                    Nykredit JCB 2015                                                              DKK                                  01.01.2015                                    A1 (RFPD)                               2,325
               DK0009778375                    NYKREDIT JCB 2016                                                              DKK                                  01.04.2016                                    A1 (RFPD)                               7,000
               DK0009779779                    Nykredit JCB 2013                                                              DKK                                  01.10.2013                                    A1 (RFPD)                               2,325
               DK0009780355                    Nykredit JCB 2014                                                              DKK                                  15.01.2014                                    A1 (RFPD)                               2,000
               DK0009781403                    Nykredit JCB 2014                                                              DKK                                  01.10.2014                                    A1 (RFPD)                               4,500
               DK0009781676                    Nykredit JCB 2013                                                              DKK                                  01.04.2013                                    A1 (RFPD)                               2,000
               LU0547790971                    Nykredit JCB 2014                                                              EUR                                  01.04.2014                                    A1 (RFPD)                               3,729
                                                                                                                                                                                                                                                        23,879
                                          =
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In Essence                                                                                                                             11
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                       EéçëëáÄäó=ïáíÜ=~=ÜáÖÜÉê=ê~íáåÖFK=
                      lå=íÜáë=Ä~ÅâÖêçìåÇ=ïÉ=ÑáåÇ=íÜ~í=éçëáíáçåáåÖ=áå=OMNPJOMNQ=åçåJÅ~ää~ÄäÉ=
                       ãçêíÖ~ÖÉ= ÄìääÉí= ÄçåÇë= ~ë= ÅìêêÉåíäó= ÄÉáåÖ= ~ííê~ÅíáîÉI= ÉëéÉÅá~ääó= ~Ö~áåëí=
                       a~åáëÜ=ÖçîÉêåãÉåí=ÄçåÇëI=ïÜÉêÉ=íÜÉêÉ=Ü~ë=ÄÉÉå=~=ÅçåëáÇÉê~ÄäÉ=ëéêÉ~Ç=
                       ïáÇÉåáåÖ=çîÉê=íÜÉ=êÉÅÉåí=Ç~óë=EëÉÉ=íÜÉ=Öê~éÜ=çå=íÜÉ=åÉñí=é~ÖÉFK==
                      få=êÉÖ~êÇë=íç=íÜÉ=äçåÖ=ÑáñÉÇ=áåíÉêÉëí=Å~ää~ÄäÉLÅ~ééÉÇ=Ñäç~íÉê=~åÇ=Ñäç~íÉê=
                       áëëìÉëI=ÜÉêÉ=íçç=íÜÉ=ÅêÉÇáí=èì~äáíó=~êÉ=ÄÉ=éêÉëìãÉÇ=íç=ÒáãéêçîÉÒ=áå=ëíÉé=
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                      eçïÉîÉêI= Ñäçï= ïáëÉ= íÜÉ= éÉêÑçêã~åÅÉ= áå= äçåÖ= Å~ää~ÄäÉLÅ~ééÉÇ= Ñäç~íÉê=
                       ~åÇ=Ñäç~íÉê=ÄçåÇë=ã~ó=ÄÉ=ÅÜ~ääÉåÖÉÇK=m~êíäóI=~=ãçêÉ=ÉñéÉåëáîÉ=ÑìåÇáåÖ=
                       çÑ= åçåJÅ~ää~ÄäÉ= ãçêíÖ~ÖÉ= ÄìääÉí= ÄçåÇë= áå= íÜÉ= åÉï= Å~éáí~ä= ÅÉåíêÉë= ~åÇ=
                       êáëáåÖ= ÅçåíêáÄìíáçå= ê~íÉë= áåÅêÉ~ëÉ= íÜÉ= ÄçêêçïÉêëÛ= áåÅÉåíáîÉ= íç= ëÉÉâ=
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                       íÜÉ= ~Çàìëí~ÄäÉ= ê~íÉ= ãçêíÖ~ÖÉ= ëÉíìéÒ= ~ë= ïÉ= âåçï= áí= íçÇ~óK= _çíÜ= íÜÉëÉ=
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                       ÄçåÇë=áå=íÜÉ=a~åáëÜ=ã~êâÉí=ÖçáåÖ=Ñçêï~êÇK=
                      lå= íÜáë= Ä~ÅâÖêçìåÇ= ÇìÉ= íç= Ñäçï= ïáëÉ= êÉ~ëçåë= ïÉ= ïçìäÇ= ÜÉëáí~åí= íç=
                       áåÅêÉ~ëÉ= íÜÉ= ÉñéçëìêÉ= áå= äçåÖ= Ç~íÉÇ= ãçêíÖ~ÖÉ= ÅêÉÇáí= ÄçåÇë= ~í= éêÉëÉåí=
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                       Å~ää~ÄäÉ=ãçêíÖ~ÖÉ=ÅêÉÇáí=ÄçåÇëK=
             =
                                                         Non-callable mortgages vs DGBs

                   82


                   77


                   72


                   67
                 bps




                   62


                   57


                   52


                   47
                   06-06-10     26-07-10      14-09-10     03-11-10      23-12-10       11-02-11     02-04-11      22-05-11     11-07-11


                              4 RD 2016 (SDRO) (ytm) vs DGB 4.000 11/15 (ytm)       2 RD 2014 SDRO (ytm) vs DGB 5.000 11/13 (ytm)
                              2 RD 2013 SDRO (ytm) vs DGB 4.000 11/12 (ytm)
                                                                                                                                            =
             =
             aÉåã~êâÛë= ä~êÖÉëí= ãçêíÖ~ÖÉ= ÅêÉÇáí= áëëìÉê= kóâêÉÇáí= ~åÇ= ëÉÅçåÇ= ä~êÖÉëí=
             oÉ~äâêÉÇáí= a~åã~êâ= Ü~îÉ= åçï= ÅÜ~åÖÉÇ= íÜÉáê= ÑìåÇáåÖ= ãçÇÉä= áå= a~åáëÜ=
             ãçêíÖ~ÖÉ= ÅêÉÇáíK= qÜÉ= èìÉëíáçå= áë= áÑ= íÜÉ= çíÜÉê= áëëìÉêë= ïáää= Åçéó= íÜÉ= ãçÇÉI=
             êÉã~áå=é~ëëáîÉ=çê=ÅçãÉ=ìé=ïáíÜ=~=ÇáÑÑÉêÉåí=ëçäìíáçåK=qç=ÖáîÉ=~å=Éî~äì~íáçå=
             çÑ= Üçï= ÅÜ~ääÉåÖÉÇ= íÜÉ= çíÜÉê= áåëíáíìíÉë= ~êÉ= áå= êÉÖ~êÇë= íç= jççÇóÛë= ê~íáåÖë=
             ~åÇ= íÜÉ= l`= êÉèìáêÉãÉåí= íÜÉó= ~êÉ= Ñ~ÅÉÇ= ïáíÜI= ïÉ= Ü~îÉ= ÄÉäçï= ëÜçïå= íÜÉ=
             ãçëí= áãéçêí~åí= l`= âÉó= ÑáÖìêÉë= áå= jççÇóÛë= ml= êÉéçêíë= Ñçê= íÜÉ= Å~éáí~ä=
             ÅÉåíÉêë=áå=èìÉëíáçåK===
    In Essence                                                                                                               12
    Overview of capital centre key figures in Moody’s latest PO reports
                                                                                                                     OC
                              Covered        (Parent)                                                           neccesary to
                                bond          issuer                     TPI-    Collateral                       maintain
    Capital center             rating         rating          TPI      leeway       score      Current OC current rating      As of date
    BRFkredit B                  Aa3        Baa1 (neg)       High         2         16.7%          1.9%             0.5%     14/04/2011
    BRFkredit E                  Aa1        Baa1 (neg)       High         1         18.1%         14.0%             8.5%     14/04/2011
    BRFkredit General            Aa3        Baa1 (neg)       High         2         12.1%          2.0%             0.5%     14/04/2011
    DLR Kredit B                 Aa1         A3 (neg)        High         2         17.3%         17.2%             5.0%     14/04/2011
    DLR Kredit General           Aa1         A3 (neg)        High         2         12.9%         12.9%             3.5%     14/04/2011
    Nordea Kredit 1              Aaa         Aa3 (sta)     Very High      5         12.9%         10.1%             1.5%     14/04/2011
    Nordea Kredit 2              Aaa         Aa3 (sta)       High         4         21.5%          7.7%             6.0%     14/04/2011
    Nykredit C                   Aa1         A1 (neg.)     Very High      5          9.7%          5.8%             0.0%     14/04/2011
    Nykredit D                   Aaa         A1 (neg.)       High         3         13.7%          7.2%             4.5%     14/04/2011
    Nykredit General             Aa1         A1 (neg.)       High         4         19.7%         87.5%             0.0%     14/04/2011
    Nykredit E                   Aaa         A1 (neg.)       High         3         12.8%          7.1%             4.5%     14/04/2011
    Totalkredit C                Aaa         A1 (neg.)     Very High      5          5.1%          2.9%             1.5%     14/04/2011
    RD S                         Aaa         A2 (neg.)       High         1         16.7%         10.1%            18.0%     21/06/2011
    RD General                   Aaa         A2 (neg.)       High         1          9.1%          5.8%             5.5%     21/06/2011
    *) Latest Performance Overview reports from Moody’s. From here we have adjusted the TPI-leeway down with 1 notch for the relevant
    capital centres, which were included in Moody’s latest TPI adjustment from Very High to High on the 10th of June 2011.
                             =
kÉï=áåáíá~íáîÉë=             få= çìê= Éî~äì~íáçå= kçêÇÉ~= hêÉÇáí= áë= íÜÉ= áåëíáíìíÉ= íÜ~í= áë= ìåÇÉê= íÜÉ= äÉ~ëí=
Ñêçã=kçêÇÉ~=                 éêÉëëìêÉK=páåÅÉ=kçêÇÉ~=_~åâ=Éåàçóë=~=ëóëíÉãáÅ=ìéäáÑí=~í=jççÇóÛë=~ë=~=êÉëìäí=
ìåäáâÉäó=áå=íÜÉ=             çÑ= ÄÉáåÖ= ìåÇÉê= íÜÉ= pïÉÇáëÜ= ÖçîÉêåãÉåíI= íÜáë= ãÉ~åë= íÜ~í= kçêÇÉ~= _~åâÛë=
ëÜçêí=êìå=                   ê~íáåÖ= áë= ÜáÖÜÉê= íÜ~å= a~åëâÉ= _~åâÛëI= _ocÛë= ~åÇ= kóâêÉÇáíÛëK= qÜáë= Ü~ë= íÜÉ=
                             áãéäáÅ~íáçå=íÜ~í=áå=jççÇóÛë=ãçÇÉä=íÜÉ=êáëâ=çÑ=~å=áëëìÉê=ÇÉÑ~ìäíáåÖ=áë=äçïÉê=
                             íÜ~å= ~í= íÜÉ= çíÜÉê= áåëíáíìíÉëI= ïÜáÅÜ= êÉëìäíë= áå= äçïÉê= äçëëÉë= áå= íÜÉ= ãçÇÉäëI=
                             ïÜáÅÜ=~Ö~áå=äÉëëÉåë=íÜÉ=åÉÉÇ=Ñçê=éêçîáÇáåÖ=~ÇÇáíáçå~ä=l`K=qÜÉêÉ=áë=áå=çìê=
                             îáÉï= åç= ÇçìÄí= íÜ~í= kçêÇÉ~= hêÉÇáí= ~ë= ~ää= íÜÉ= çíÜÉê= áëëìÉêë= ãìëí= éêçîáÇÉ=
                             ëìééäÉãÉåí~êó= Åçää~íÉê~äI= Äìí= ïÉ= Éëíáã~íÉ= íÜ~í= áí= ïáää= ÄÉ= ~= êÉä~íáîÉäó=
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                             ãçîÉ=íçï~êÇë=kóâêÉÇáíÛë=ãçÇÉäK=tÉ=ÉñéÉÅí=íÜ~í=íÜÉó=~í=äÉ~ëí=áåáíá~ääó=ïáää=
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ÄÉÉå=~ÑÑÉÅíÉÇ=Äó=            Ü~ë= É~êäáÉê= ÄÉÉå= ëìÄàÉÅíÉÇ= íç= èìáíÉ= ÅçåëáÇÉê~ÄäÉ= l`= êÉèìáêÉãÉåíë= íÜ~í=
jççÇóÛë=ÖÉåÉê~ä=             ëìÄëÉèìÉåíäó=Ü~îÉ=Ñ~ääÉåI=ïÜáÅÜ=ÅçìäÇ=ãÉ~å=íÜ~í=íÜÉêÉ=áë=ëíáää=~=Ñçêã=çÑ=l`=
Ççïåï~êÇ=qmf=                ÄìÑÑÉê=áå=íÜÉáê=pal=Å~éáí~ä=ÅÉåíêÉ=ÉîÉå=áÑ=íÜÉ=áåÅêÉ~ëÉÇ=êÉÑáå~åÅáåÖ=êáëâ=få=
~ÇàìëíãÉåíI=Äìí=             jççÇóÛë=ãçÇÉä=~äëç=ÜÉêÉ=ãìëí=ÄÉ=ÉñéÉÅíÉÇ=íç=áåÅêÉ~ëÉ=íÜÉ=l`=êÉèìáêÉãÉåíK=
~êÉ=~äêÉ~Çó=áå=              få=íÜÉ=äçåÖÉê=êìå=_ocâêÉÇáí=ïáää=éêçÄ~Ääó=äççâ=~í=íÜÉ=åÉÉÇ=íç=ÅÜ~åÖÉ=äç~å=
Çá~äçÖìÉ=                    ëíêìÅíìêÉ= ~åÇ= äççâ= ~í= Üçï= íÜÉó= Å~å= ãáåáãáòÉ= l`= êÉèìáêÉãÉåíë= Ñêçã=
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In Essence                                                                                                                      13

Market views
 ‘**’ indicates a stronger viewpoint. Changes from last week are in bold – last week's view in brackets.
        Spread                                              3 months view                              Comments
        - Repo-spread                                       Widening                                     Central bank CD rate
        - 2Y government spread                              Widening**
   DK vs.


        - 5Y government spread                              Neutral/Widening
        - 10Y government spread                             Neutral
        - 30Y government spread                             Widening
        - Swap spreads                                      Tightening
        Non-callable mortgage bonds
         - SwapOAS / Asset Swap Spread                      Neutral
         - Government OAS                                   Neutral
        SwapOAS capped floaters
   Mortgage Bonds




        SwapOas 30Y (6% cap)                                Neutral
        SwapOas 30Y (5% cap)                                Neutral
        SwapOas 10Y capped                                  Neutral
        Benchmark mortgage performance – 4% 41
         - SwapOAS vs. yield level                          Neutral
         - Government OAS vs. yield level                   Neutral
        Coupon spreads – OAS vs. yield level
         - 30Y 7%-6%                                        Neutral
         - 30Y 6%-5%                                        Neutral
         - 30Y 5%-4%                                        Neutral
        Coupon/Maturity spreads – OAS vs. yield level
         - 30Y 5% / 20Y 4%                                  Neutral




Portfolio Recommendations – Danish bonds
O: Overweight, N: Neutral, U: Underweight. 2 marks mirror stronger viewpoint.
Changes from last week marked with bold - last week's view in brackets.
                             Portfolio
    Type Maturity                         Comments
                            weighting
                      Mortgage Government




           0-2 year            UU
           2-5 year            UU
 Non-callables




           5-10 year            N
           10+ year             U
           Total                O
           0-2 year             N
           2-5 year             N
           5+ year              N
           Total                N
    Total                      N/O
         Capped
 CF




                                N
        mortgages
           15-20 year           N
                        5% 4%




           30 year              N
 Callables




           20 year              N
           30 year              N
                    %%




           30 year              N
                    7 6




           30 year              N
    Total                       N
In Essence                                                          14


 Fixed Income Research
 _ç=^åÇÉêëÉå=                PP=NT=TT=MU=           ÄçK~åÇÉêëÉå]ëÉÄKÇâ
 eÉåêáâ=^êé=                 PP=OU=NM=TR=            ÜÉåêáâK~êé]ëÉÄKÇâ
 cêÉÇÉêáâ=kçêÇëÄçêÖ=         PP=OU=NM=UU=   ÑêÉÇÉêáâKåçêÇëÄçêÖ]ëÉÄKÇâ
 páãçå=pÅÜìäíò=              PP=OU=NM=TP=         ëáãçåKëÅÜìäíò]ëÉÄKÇâ
 p›êÉå=o~ëãìëëÉå=            PP=OU=NM=TO=      ëçêÉåKê~ëãìëëÉå]ëÉÄKÇâ=

 Fixed Income Sales
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  In Essence                                                                                             15

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    In Essence                                                                                                                            16


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