Royal Bank of Canada inaugurated legislative Canadian covered bond issuance by launching a $1.75bn three year deal yesterday (Tuesday), with a treasury official at RBC saying that the issuer was ready to move soon after its programme was registered two weeks ago.

Credit Suisse, Morgan Stanley and RBC priced the deal at 35bp over mid-swaps, following guidance of the 35bp area. More than $2bn (Eu1.52bn/C$1.04bn) of orders were placed from a “nice diverse mix” of accounts to make for a fairly granular distribution, according to a lead syndicate official.

A larger deal would have been possible, he said, but the issuer decided to size a slightly smaller deal and leave the spread unchanged to pave the way for secondary market performance while satisfying investors’ demand.

Royal Bank of Canada’s trade is the first Canadian benchmark covered bond since the middle of November, when RBC last issued. Canadian covered bond legislation was enacted in June 2012, with Canada Mortgage & Housing Corp (CMHC), the designated regulator, in December publishing guidelines complementing the law.

RBC launched the transaction less than two weeks after CMHC on 3 July announced that it had registered the programme, as well as CIBC’s, in its first approvals under the new framework.

“We had a pretty high state of readiness once we got through the regulatory process,” David Power, vice president, corporate treasury at RBC, told The Covered Bond Report. “The market had been quite unsettled and we wanted to see a time when it was more stable.”

RBC’s last covered bond was also a three year, for US$1.5bn.

“The book was almost $500m larger than the last one,” said Power, “with about 20 additional investors.”

He said that whereas about 50 participated in the November deal, some 70 investors were involved in yesterday’s.

However, Power said it is too early to say how much difference the fact that the programme is now backed by legislation may have made to execution.

As well as the new issue, all outstanding RBC covered bonds are now included under the legislative framework.

“As we’ve always said,” Power added, “legislation was a natural evolution for a country supportive of covered bonds as part of their housing finance framework.”

CIBC is this week on a roadshow in Europe ahead of a potential euro benchmark that would be the first since 2008.

RBC opened the Canadian covered bond market with a euro deal in 2007 and Power said that with regards to currency, “anything’s possible”.

“We have issued in four currencies – Swiss francs, euros, Canadian dollars and US dollars,” he said, “so obviously we are open to issuing in different currencies as and when it makes sense.”

A lead syndicate official said that although RBC could have looked to do a euro deal, the issuer prefers to keep duration slightly shorter and that a three year trade made more sense in dollars. A five or seven year maturity would be more attractive in euros, where the curve is much more flat than in dollars. The bid is stronger in seven than five years in euros, he added.