Canada

Bank of Nova Scotia’s inaugural legislative covered bond is unlikely to offer much room for performance, and isn’t eligible for bank liquidity buffers. At 10bp, the spread is broadly in line with expectations and offers genuine diversification in a hungry market. But at 9bp its secondary market performance is less assured.

National Bank of Canada extended its euro curve by two years and priced its second euro covered bond, a €1bn seven year benchmark, on Tuesday. It looked cheap versus its previous deal, but fair value to where other Canadian transactions were trading on Tuesday.

La Caisse Centrale Desjardins du Quebec (CCDQ) issued its inaugural legislative covered bond on Tuesday, but despite a high quality book, a seemingly attractive spread and a two week hiatus in term benchmark covered bond supply, the issuer could only muster a modest oversubscription.

Key European investors have asked bookrunners on Caisse Centrale Desjardins du Quebec’s (CCDQ) debut euro covered bond for extra time to get credit lines in place. The Canadian bank will print early next week.

Primary market activity picked up on Wednesday as France’s BPCE took advantage of secondary demand at the long end of the French curve to tap its November 2023 issue by €500m taking the deal size to €1bn. After issuing a deal in December, the National Bank of Canada has returned to mandate the same group of leads as its previous deal for a European roadshow.

Investors have not turned in for Christmas quite yet, but bankers expect few issuers will to try to pre-fund over the rest of December. The success of ING Belgium’s €1bn five year on Tuesday could, however, entice one more Belgian issuer to market before year-end.

ING Belgium will finish its roadshow on Friday and National Bank of Canada is set to emerge from blackout next week, increasing the chances of two or three new covered bond deals next week. Primary market conditions remain strong, despite modest profit taking, said bankers on Thursday.

Royal Bank of Canada (RBC) returned to the covered bond market for the fifth time this year, and its second time in euros, to issue a €1.5bn benchmark five year on Tuesday. The deal priced with a concession to where the only other Canadian euro five year was trading — but offered a negligible new issue premium.

Canadian Imperial Bank of Commerce (CIBC) became the second Canadian issuer to price a legally compliant covered bond in Australian dollars. The A$500m floating rate long three year deal, which could have been increased, provided competitive funding and solid investor diversification.

Royal Bank of Canada sealed its place as a truly global issuer when it returned to the dollar market for the second time in three months to raise $2bn of five year funding, its longest SEC registered deal in the currency so far. This was its fourth benchmark covered bond deal of 2013, making it by far the most prolific borrower with the broadest global reach.

Royal Bank of Canada’s recent €2bn seven year covered bond came in for criticism because its final spread of 16bp was deemed too far away from the initial price thoughts that are supposed to help investors make a decision on the relative value of a trade. If they commit to buy with an indication of interest, issuers should have the decency to make sure that the final spread comes reasonably close to the starting point.

Canadian Imperial Bank of Commerce attracted a very well oversubscribed book for its inaugural Canada Housing Mortgage Corporation registered covered bond. It opted for €1bn — only half the size of Royal Bank of Canada’s recent euro issue — but its needs are much smaller and it funded tighter than where it could have in US dollars, the leads said.