Canada

CIBC showed that the covered bond market remains open despite investors’ apparent lack of enthusiasm for Germany public sector jumbo Pfandbriefe this (Tuesday) morning, quickly reaching oversubscription on a new issue. Encouraged by this, Sparebank 1 is entering the market this afternoon with a five year deal.

The 4% limit on covered bond issuance as a percentage of total liabilities is one of the most restrictive parts of the policy statement released by the Federal Deposit Insurance Corporation last week. The Cover spoke to the Independent Community Bankers of America about their views on the cap, and whether pooled issuance was a prospect in the US.

*Excludes German, French, Spanish and Nordic issuance.

With Canadian Imperial Bank of Commerce visiting investors on a European roadshow next week, The Cover spoke to the issuer as it attempted to explain why its mortgage-backed debut would also be the first public sector bond from Canada.

CIBC has mandated ABN Amro, CIBC, Commerzbank, Merrill Lynch and HSBC to lead manage its debut covered bond. The bank will be roadshowing late this month.

The spread between obligations foncières and other French covered bonds has underlined the power of legislation, and the UK hopes its own new framework will pay off. But recent developments suggest a more complicated picture. The Canadian regulator, for one, has yet to be won over, and structured issuance in Germany has finally emerged.

Canadian Imperial Bank of Commerce’s planned covered bond programme will be backed solely by mortgages insured by Canada Mortgage & Housing Corporation, making it the country’s first public sector-backed issuance, in a sign of how banks are adapting their issuance to the new market environment.

Canadian Imperial Bank of Commerce plans to roadshow a new covered bond programme early in the second quarter, following in the footsteps of not only those officially in the pipeline, but a variety of other issuers who have been visiting investors but adopting a lower profile.

Canada’s credit unions are exploring ways of emulating Spain’s savings banks by issuing pooled covered bonds, said Gilbert Ménard, managing director, capital division, at the Office of the Superintendent of Financial Institutions last Friday. Indeed Charles Milne, associate vice president, treasury and funding services at Credit Union Central of British Columbia (CUCBC), has dubbed covered bonds “the new black” and is eyeing issuance in the third quarter.

Rating agency representatives yesterday afternoon discussed their various methodologies and the weight they give to legislative backing, a key issue as the market sees new structured issues from Canada and previous structured issuers, such as the UK, on the cusp of introducing a legislative framework.

With the covered bond market experiencing the effects of turbulent equity markets and economic gloom from the US, panellists at the IMN covered bond conference in London said that now was the time for a back to basics approach in the market.

Bank of Nova Scotia, the second largest Canadian bank by market capitalisation, is on a roadshow for its US$15bn covered bond programme, and is keen to follow Royal Bank of Canada (RBC) and Bank of Montreal (BMO) into the covered bond market. But when it comes to pricing, BNS is keen to position itself beside RBC rather than the wider BMO.