Canada

Bank of Montreal (BMO) on Tuesday became the third Canadian covered bond issuer to take advantage of an improvement in Aussie dollar issuance conditions following a relaxation in the Reserve Bank of Australia’s repo requirements.

A trio of agencies hit screens with dollar deals on Tuesday. Bank Nederlandse Gemeenten and CDP Financial tapped the three year part of the curve, while the Ontario Teachers’ Finance Trust reopened a five year market that had been shuttered by coronavirus-related volatility.

Covered bond investors have begun to return, primary market spreads have tentatively started to tighten and new issue concessions are coming down — which theoretically bodes well for a broadening of supply. But bankers, battered by the stresses of the last month, remain cautious.

Toronto-Dominion Bank launched the first Australian dollar covered bond of the year on Thursday night, issuing in good size at a similar spread to where it recently issued its dollar covered bond.

Guarantor: CPP Investment Board

The euro public sector bond market has been fired up, with all tiers of issuers in the market. But it is not the same picture for every SSA, with borrowers eligible for the European Central Bank’s asset purchase programme getting a far brighter reception than those not.

Having dropped off in early March, Swiss franc issuance has bounced back in the last fortnight, buoyed by returning investors flocking to low investment-grade rated borrowers, like triple-B rated cement manufacturer LafargeHolcim, and piling into a record-breaking foreign covered bond.

CPPIB Capital and L-Bank found strong demand for two year dollar deals on Thursday as central banks seek haven assets with chunky spreads to US Treasuries. For L-Bank, it also brought a sense of redemption after it had to pull a deal two weeks ago in the same currency and maturity following a lack of demand.

The euro market for SSAs has returned to life in impressive style, but borrowers outside the ECB’s asset purchase programme are meeting with a chillier reception than their European counterparts.

A leading covered bond investor has reacted positively to a series of measures announced by Canada’s Office of the Superintendent of Financial Institutions’ (OSFI) which have effectively provided stable access to emergency funding, including a temporary increase in the amount of covered bonds the country's banks can issue. The move comes after a heavy spell of supply that had sparked concerns that Canadian banks were struggling for cash.

CPPIB Capital hit the euro market on Monday, becoming the first SSA borrower not eligible for QE to access the market since the coronavirus outbreak shuttered the market. A fellow Canadian is set to follow suit.

Toronto Dominion Bank attracted a slightly larger order book for its three year dollar covered bond on Friday than Bank of Nova Scotia did for a similar deal issued on Wednesday. Both deals offered a considerable pick-up to where they would have been expected to be priced in euros, but the overall spread outlook remains a subject for hot debate. At the same time on Friday, Canadian Imperial Bank of Commerce was set to issue a ‘blow out’ three year Swiss franc deal.