Canada

Sterling covered bond supply so far this year has been high but Toronto Dominion Bank showed on Monday that demand was also plentiful, as it issued another tightly priced transaction with a strong book.

Guarantor: Canada

The three year part of the dollar curve took centre stage for public sector issuers this week, having played second fiddle to fives so far this year. Issuers were met with just as strong a reception in the short end of the curve as they have enjoyed in fives so far — and SSA bankers believe some could be tempted to test the longer end.

DNB Boligkreditt and Canadian Imperial Bank of Commerce this week issued the first five year covered bonds of the year and found strong demand, even though there was a sensitivity around the final spread.

Dollar SSA deals are showing little signs of a hangover from a public holiday in the US on Monday, with all three of Wednesday’s trades well over subscribed and pricing inside guidance.

Canadian Imperial Bank of Commerce followed DNB Boligkreditt with the second five year covered bond of the year. The tenor, which appeals to the broadest audience and offers the best execution certainty, should become increasingly popular as tapering of central bank purchases and refinancing of the central bank liquidity takes effect.

A widening in dollar swap spreads since the end of last week should help support a trio of dollar deals on screens for Wednesday’s business, said SSA bankers.

Appetite for quality dollar issuance is strong as 10 year Treasury yields hover above 2.54%, prompting two borrowers to hit screens on Monday with dollar benchmarks.

Price sensitivity is becoming a material theme in covered bond deals issued this week, and the first Canadian covered bond of 2018, issued by Bank of Nova Scotia on Friday, was no exception.

The sterling covered bond market enjoyed a strong start to the year, with four issuers raising a collective £3.7bn. Barclays priced the first deal of the year, which also happened to be one of the longest and largest.

Canadian public sector issuers had a barnstorming year in the international debt markets in 2017, propelled by a strong economic performance by Canada and many of its provinces. But challenges loom — uncertainty over Canada’s trade relationship with the US, geopolitical instability and changing global monetary policy are just three of many concerns that borrowers, bankers and investors in Canada’s public sector bond markets will have to deal with this year. GlobalCapital met key market participants in Toronto in November to discuss the key issues.

SSA bankers looking to get their Christmas shopping in early were in a state of shock on Tuesday, as the World Bank brought a dollar deal to follow the Province of New Brunswick’s return to the currency after a six year hiatus. But that could be it for 2017 as issuance is unlikely next week, which is bisected by a Federal Open Market Committee meeting.