Royal Bank of Canada launched a $1.5bn three year covered bond yesterday (Thursday), the second deal off the first SEC registered covered bond programme. KBC is meanwhile expected early next week with one of the last euro benchmarks as the market slows into year-end.

Leads Citi, RBC and UBS priced RBC’s three year benchmark at 20bp over mid-swaps. The pricing was in line with initial price thoughts and guidance, with the leads having built a book understood to be around $1.8bn. A banker away from the leads said that the 20bp over level was equivalent to around 31.5bp over Treasuries.

Another said that 20bp was a “tight-ish” level, but that conditions for new covered bond issues in the dollar market were benign.

“If you look at all the trades in the covered bond space in dollars they have gone very well,” he said, “with ING having been successful earlier this week. This is probably a function of where SSAs are trading in dollars – super-tight.

“Investors are therefore looking at credit for triple-A paper and the most obvious place is in the covered bond space.”

Export Development Canada (EDC) priced a $1bn five year issue at 10bp over Treasuries on Tuesday, which he said was equivalent to 2bp-3bp through mid-swaps, with RBC at 20bp over in a shorter maturity clearly looking attractive to some investors in comparison. ING sold its $1.5bn 10 year issue at 98bp over mid-swaps on Tuesday.

RBC’s outstanding September 2017s – which were the first SEC registered covered bonds ever issued – were said to be quoted at 34bp/30bp over mid-swaps.

KBC is expected to launch its debut covered bond on Monday after having finished preparations for the deal. A banker at one of the leads said that after the end of its roadshow the issuer held some investor calls and made sure that accounts had time to prepare for what will be only the second covered bond from Belgium.

The first, a Eu1.25bn five year from Belfius Bank launched on Monday of last week (19 November), has tightened from a re-offer of 45bp over mid-swaps to 33bp/29bp, according to the banker.

“There is a good tailwind behind this trade,” he added. “Belfius has performed very strongly, and OLOs have been an extremely strong performer in the past couple of weeks and are at around plus 6bp now. The five year OAT is also at minus 7bp from as high as the low single-digits only a couple of weeks ago.”

A syndicate official away from the leads said that he understands that a three year maturity is being targeted and that a level of 20bp-25bp over mid-swaps would be appropriate for this. He noted that Axa Bank Europe SCF – French covered bonds backed by Belgian collateral – 2016 paper is trading at 25bp/12bp.

The lead banker said that Monday looks like “the obvious day” for launching the deal, with next week also likely the last week of the year before liquidity starts dropping off into year-end.

“Secondary flows are tailing off, but the market is still well bid,” he added.