Canada

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.

Bank of Montreal is set to price its Eu1bn five year covered bond at 24bp over mid-swaps today, paying 4bp more than Royal Bank of Canada did for its 10 year deal last week, after suffering from the wider than expected pricing of Banco Espiríto Santo’s Eu1.25bn three year deal at 20bp over on Tuesday.

The books were opened for Bank of Montreal’s (BMO) debut covered bond today and by mid-morning some Eu700m of orders had been placed, with the book continuing to build. The benchmark sized, five year euro deal is being marketed with guidance in the 24bp area and has yet to be refined.

The market survived an early test of appetite for lengthy structured deals in Royal Bank of Canada’s (RBC) Eu1.25bn 10 year transaction, which was priced at 20bp over mid-swaps yesterday (Wednesday).

Royal Bank of Canada (RBC) looks set to successfully re-open the long end of the covered bond market. Pricing of 20bp over mid-swaps proved enough to attract Eu1.46bn of orders, allowing the final size of the deal to be set at Eu1.25bn. Final pricing is expected this afternoon (Wednesday).

Royal Bank of Canada (RBC) restarted 10 supply by boldly announcing such a mandate yesterday (Monday), attempting to follow the success of its debut five year with a 10 year euro jumbo in the face of a market that had proved hostile to both structured covered bonds and longer dated maturities.

The covered bond market continued to enjoy calmer weather this week, with spreads recovering on the back of a calm week. Market participants reported that potential issuers now felt secondary spreads were stable enough to guide future issuance.

Dominion Bond Rating Service (DBRS) has assigned a provisional triple-A rating to Bank of Montreal’s covered bond programme. BMO is expected to launch what will only be the second Canadian covered bond in January.

Bank of Montreal is confident that it can repeat the success Royal Bank of Canada enjoyed with its debut when it becomes the second issuer of Canadian covered bonds in the new year. The bank told The Cover that it was encouraged by the reception given to RBC’s inaugural issue.