National Bank of Canada has filed a prospectus for a US$5bn (Eu3.75bn/C$4.94bn) global covered bond programme. Meanwhile, Bank of Montreal today (Tuesday) launched a five year covered bond into the US.

National Bank of Canada’s prospectus, dated yesterday (Monday), names Barclays Capital and NBF Securities UK as arrangers of the programme.

DBRS has assigned a provisional rating of AAA to the programme and the prospectus states that triple-A ratings are expected from Fitch and Moody’s. DBRS rates National Bank of Canada, the sixth largest bank in the country, AA (low).

The covered bonds will be backed by a Canada Mortgage & Housing Corp (CMHC) insured pool of residential mortgages.

DBRS highlighted a 78.9% concentration of loans in Quebec in the cover pool.

“While the assets may be insulated from the economic factors experienced in the rest of Canada, there is considerably more geographic and regional economic risk with the concentration in Québec,” said the rating agency in a pre-sale report. “However, this risk is significantly mitigated as DBRS considers the credit loss negligible for defaulted mortgages as a result of the mortgage insurance provided by AAA-rated CMHC.”

Bank of Montreal today launched a five year benchmark dollar covered bond into the US at the mid-swaps plus 47bp area. Like National Bank of Canada’s planned issuance, BMO’s covered bonds are backed by CMHC-insured collateral.

“People just love Canadian risk,” said one banker close to the deal, “and all the US investors are happy to add more.”

Canadian banks dominated US dollar covered bond issuance last year after Canadian Imperial Bank of Commerce (CIBC) reopened the market.