Islandsbanki hf.: Íslandsbanki enters a market making agreement for covered bonds
Íslandsbanki hf. has signed market-making agreements with Arion bank hf., Kvika hf., and Landsbankinn regarding covered bonds issued by Íslandsbanki on NASDAQ Iceland.
The purpose of the agreements is to stimulate trading in the bonds in order to generate normal market prices and to foster effective and transparent price formation.
The market makers will place bid and ask orders for the bonds every day. Market makers are not obliged to submit bids and asks for new bond series until the series has reached ISK 3 billion and the minimum bid /ask size shall be ISK 20 million until the series has reached ISK 5 billion, when the minimum shall increase to ISK 60 million until the series has reached ISK 10 billion and then the minimum shall be ISK 80 million. The series ISB CBI 24, ISB CBI 26 and ISB CBI 30 are not subject to the aforementioned condition and the minimum bid/ask size shall be ISK 60 million for the series ISB CBI 24 and ISB CBI 26 and the minimum bid/ask size for ISB CBI 30 shall be ISK 40 million.
Individual market makers are released from their obligations on a particular trading day once the trading volume (specified as “AUTO”) of that particular market maker totals ISK 500m for all series of covered bonds issued by Íslandsbanki.
The maximum bid-ask spread depends on the number of years to maturity at any given time in accordance with the table below.
| Years to maturity | Maximum spread |
| 0 – 6 months | No maximum |
| 6 months – 2 years | 0.20% |
| 2 – 4 years | 0.30% |
| 4 -6 years | 0.35% |
| 6 – 9 years | 0.60% |
| 9 -12 years | 0.70% |
| 12 – 18 years | 1.00% |
| 18 years or more | 1.15% |
Series issued on a floating rate basis, such as REIBOR or other equivalent public interest rate indexes shall have a maximum bid-ask spread of 0.20%.
Inflation-linked series that are prohibited from further issuance, according to the Central Bank of Iceland’s rule no. 492/2001 on indexation of savings and loans, as subsequently amended, are exempt from the aforementioned obligations on maximum spread.
In conjunction with the market-making agreements, Íslandsbanki will provide the market makers with bond lending facilities. The maximum loan in each series of covered bonds shall be ISK 320 million at nominal value except for the series ISB CBI 24 where the maximum loan is ISK 80 million at nominal value.
For further information:
Investor Relations – ir@islandsbanki.is
