Canada

Royal Bank of Canada has issued the first Australian dollar benchmark of 2013, pricing the three year floating rate deal at the tight end of guidance. The depth of demand and the competitive funding cost could tempt other covered bond issuers to look at the Australian market.

Not content with pricing the first regulated Canadian covered bond in euros and the first regulated benchmark in US dollars, the Royal Bank of Canada is now marketing its first Australian dollar covered bond benchmark.

Core European covered bonds were supported on Thursday despite recent downgrades. But weaker Spanish names were under pressure on concerns that the European Central Bank could be poised to reconsider the repo treatment of covered bonds relative to ABS. Meanwhile, primary hopes were hit after it emerged that programme documentation delays could cause Canadian Imperial Bank of Commerce (CIBC) to launch its benchmark in September rather than next week.

Royal Bank of Canada has reopened the Canadian covered bond market with the first deal to comply with new covered bond legislation that the country put in place late last year. The landmark $1.75bn trade was the first Canadian covered bond of 2013 and is likely to be followed by a series of other deals — although these may not now emerge until September.

Canadian Imperial Bank of Commerce (CIBC), which is roadshowing for a euro covered bond, has the potential to price inside last week’s deal for Quebec, bankers told The Cover on Monday. Bankers do not expect covered bond issuance from European banks until the end of August at the earliest. The market has barely reacted to Friday’s downgrade of France by Fitch and in some cases, spreads have actually tightened.

Canadian Imperial Bank of Commerce is set to be the first Canadian bank to issue a deal using the country’s new legislative framework after it mandated banks for what is most likely to be a euro denominated transaction.

Canadian banks are set to bring new covered bonds after US and Canadian regulators cleared the way for three issuers on Wednesday. The covered bond programmes of Canadian Imperial Bank of Commerce (CIBC) and Royal Bank of Canada (RBC) have been activated by the Canadian Mortgage and Housing Corporation (CMHC). Separately, Bank of Montreal has moved a step closer to SEC registration.

Secondary market selling of covered bonds slowed a little on Friday ahead of the US payrolls report. But bankers say the US data won’t make much of a difference as further selling is likely. In the primary market there is concern that if a deal is incorrectly priced, it will add to problems and potentially close the funding window for other issuers

Scotiabank filed for SEC registration this week, increasing the likelihood of other issuers filing programmes with the SEC, a US lawyer told The Cover on Thursday.

Santander Chile is set to issue Chile’s first domestic covered bond this month. It will be triple-A rated and have a 15 year maturity. Meanwhile in Canada, Bank of Nova Scotia is lining up an SEC registered deal, the first off the country’s new legal framework.

The covered bond market is open for almost any issuer and though its unlikely that activity will pick up quickly, there are a number of potential transactions expected in the coming weeks, bankers told The Cover on Monday.

Under a new model, that will be used to analyse Canadian covered bonds, Fitch said on Tuesday that Canadian house prices were overvalued by a real 20%, which is more than bankers had previously said.