North America

The Bank of Montreal (BMO) became the sixth Canadian bank to issue legislative covered bonds when it opened books for its first legislative deal on Tuesday. The transaction was priced at the tight end of the range of Canadian deals and encountered some price sensitivity but was still comfortably oversubscribed.

Bank of Montreal’s (BMO) covered bond programme was recently signed off by the Canadian Mortgage Housing Corporation (CMHC), giving rise to speculation that it could return to the covered bond market after Easter with a newly set up programme and a legally compliant covered bond deal. A still-favourable cross currency swap suggests it could become the fourth Canadian bank to issue in euros this year.

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.

When General Electric issued a debut $500m sukuk five years ago it did not receive a great deal of acclaim. But with the company considering another potential Islamic deal later this year, neither it nor other rumoured Western first time borrowers such as Total should fear for a bad result this time around.

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.