CIBC launched its first issue off a new legislative covered bond programme today (Wednesday), a five year euro benchmark that met with strong interest far exceeding a Eu1bn deal size, with bankers encouraged by the follow-up to a reopening of Canadian euro supply by RBC.

Leads CIBC, Commerzbank, HSBC and RBS gathered more than Eu3bn of orders for what is Canadian Imperial Bank of Commerce’s first euro benchmark covered bond since 2008 and only the second such Canadian new issue since then after Royal Bank of Canada re-opened the long dormant market on Thursday.

RBC’s deal was a Eu2bn seven year priced at 16bp over mid-swaps on the back of Eu3.5bn of orders. The bonds were said to be trading at around 14bp over this morning.

The CIBC leads will price a Eu1bn five year deal at 9bp over mid-swaps, the tight end of guidance of 10bp plus or minus 1bp that followed initial price thoughts (IPTs) of the 12bp over area. The IPT phase is said to have generated some Eu2.25bn of indications of interest.

The deal comes a week-and-a-half after CIBC went on a European roadshow, a move that it announced on 10 July, a week after its new programme was registered by Canada Mortgage & Housing Corp under Canada’s new covered bond legal framework.

Documentation issues meant that CIBC could not proceed with a new issue sooner after the end of its roadshow, with syndicate officials at the leads having said that the issuer would postpone a transaction until after an August quiet period if it did not get a deal away this month.

CIBC announced the mandate for the five year deal yesterday (Tuesday) afternoon.

Syndicate officials away from the leads were positive about the deal even though some took issue with the starting point, saying it was cheap. For some the re-offer spread also could have been tighter, with one noting that the issuer is “only” doing a Eu1bn deal.

“But it’s the midst of summer so I wouldn’t criticise,” he said. “It bodes well for Canadian covered bonds. We have two data points, two issuers – it’s very interesting.”

Another disagreed with the 12bp over area as the starting point for CIBC’s trade, but said it is a “great” deal. He expects the bonds to tighten by several basis points in the secondary market by the end of the week.

Another syndicate banker said CIBC went out with a more “realistic” spread than where RBC’s transaction started, and that the double-digit departure point was the right approach given that the five to seven year curve is not that steep.

A spread of 9bp over would be fair, he added, although RBC should price tighter than CIBC.

CIBC benefitted from the success of RBC’s transaction, he said.

RBC had its programme registered on the same day as CIBC, and has sold three benchmark covered bonds – in US dollars, euros, and Australian dollars – since then, in that order.

Its euro benchmark came in for criticism from syndicate bankers away from the leads for having been pitched too generously in their view – initial price thoughts were in the low 20s over – and some thought it could still have been priced tighter, despite what one banker said was a 27% spread tightening from the IPT phase.