Commonwealth Bank of Australia and Toronto-Dominion together sold US$5bn (Eu3.8bn) of benchmark covered bonds yesterday (Monday), with CBA catering to “bifurcated demand” and anticipating upcoming supply with a dual tranche deal, according to its group treasurer.

TD priced a $3bn (Eu2.28bn/C$2.99bn) five year issue at 45bp over mid-swaps via Barclays Capital, BNP Paribas, RBC and TD. The Canadian deal is the largest US dollar covered bond this year and together with a CBA’s $2bn deal lifted benchmark issuance in the currency this year by one-third.

CBA’s deal represents its covered bond debut in US dollars. It raised $2bn (Eu1.52bn/A$1.89bn) via a five year issue that leads CBA, Citi, Goldman Sachs and JP Morgan priced at 115bp over mid-swaps, and $2bn via a three year senior unsecured note that was priced at 155bp over Treasuries, which was equivalent to around 127bp over mid-swaps, according to a market participant. A syndicate official away from CBA’s deal said that it could be seen as coming without a new issue premium.

More than $4bn of orders are said to have been placed for each tranche, with around 100 investors participating in the covered bond transaction.

Lyn Cobley, group treasurer at CBA, said that the issuer is delighted with the outcome of the deal.

“We think it was a sensational deal,” she told The Covered Bond Report. “We are very pleased that we priced flat to where ANZ and Westpac came, but with a much larger size and a greater number of investors participating.”

ANZ and Westpac in November launched $1.25bn and $1bn five year deals at 115bp over mid-swaps, which have since come back to trade around these levels after having poorly performed after launch. The deals were said to be around 111bp over asset swaps on the bid side yesterday.

CBA’s deal was launched on the back of a roadshow that followed the release of the issuer’s half yearly results, on 15 February, with the decision to launch a dual tranche transaction, including a senior unsecured issue, taking into account feedback from the roadshow, according to Cobley.

“The reaction on the roadshow was very constructive, with many more investors having approvals in place than at the end of last year,” she said. “The market tone is also much more constructive than it was.”

Feedback from the roadshow also made clear that there was “bifurcated demand” for senior unsecured and covered bond supply from CBA, she said, adding that the issuer decided to cater to both via a dual tranche issue in anticipation of future issuance into the US.

“There has been a lack of supply into the US market and with the amount of supply that is set to come we wanted to get ahead of that issuance,” she said. “It seemed like the most sensible strategy, and we are delighted with the outcome. It was the right strategy.”