Americas

Royal Bank of Canada returned to the dollar covered bond market for the first time this year, issuing the third benchmark in that currency this month. The $1.75bn deal priced at 27bp over mid-swaps, making it the equal largest this year and tightest in dollars for several years.

Royal Bank of Canada (RBC) mandated and launched the fifth US dollar covered bond benchmark of the year on Tuesday. The issuer followed the lead of Bank of Nova Scotia which priced the first US dollar denominated Canadian covered bond a fortnight ago.

Royal Bank of Canada has priced its first Australian dollar covered bond of the year and the second in that market this year. The funding was close to what it could have achieved in US dollars and demonstrated the ability of the Kangaroo market to be strategically relevant to the global funding programmes of financial institutions, said RBC.

Toronto-Dominion Bank was set to price the first sterling denominated Canadian three year covered bond on Friday, which will be the seventh sterling covered bond this year and the third deal from a non-UK name. It is also the largest sterling deal issued by a bank outside the UK.

Bank of Nova Scotia was set to price the tightest and longest Canadian covered bond issued in euros on Wednesday. It was also the tightest spread for any non-German seven year seen this year, and at €1.5bn the largest in that tenor.

A few draft restrictions related to the eligibility of European covered bonds in the liquidity coverage ratio (LCR) have been dropped by the EC suggesting the final wording, due at the end of September, will be supportive for covered bonds. In contrast, covered bonds have been left out in the final wording of US LCR regulations, in line with expectations.

Jerry Marlatt, senior council at Morrison & Foerster LLP and Dr. Mark Calabria, director of financial regulation studies at the CATO Institute speak to The Cover about the Volcker rule and the outlook for US covered bonds.

Nearly a year after registering its covered bond programme with the US Securities and Exchange Commission, Canadian issuer Bank of Nova Scotia filed its prospectus. The move is a likely precursor to a dollar issue.

Toronto Dominion’s first legally compliant covered bond stormed the market on Monday morning, raising €1.75bn – €750m more than any of the other five Canadian euro benchmarks that have been launched this year.

Toronto Dominion and BNP Paribas should be ready to launch the Canadian bank’s first legally compliant covered bond next week after announcing the prospective deal on Wednesday. The announcement was not a total surprise, given that the bank’s programme had been signed off by the regulator in late June. However it has removed uncertainty over timing, which bankers away from the deal commended.

A US covered bond legal framework may soon be back on the political agenda. A speech by Jacob Lew, US Treasury secretary, last week has caught the attention of market participants, who hope a covered bond bill may be detached from reform of the US government-sponsored enterprises, Fannie Mae and Freddie Mac.

Canadian Imperial Bank of Commerce recently updated its covered bond prospectus, giving rise to speculation that it could return to the covered bond market this year. CIBC is only one of two Canadian banks that have not issued in euros in 2014 and was last seen in the market in July 2013.