Royal Bank of Canada priced a A$1.25bn three year floating rate issue at the tight end of guidance today (Tuesday) after attracting some A$1.8bn of orders to what was the issuer’s inaugural Kangaroo covered bond and the first Australian dollar covered bond since November.

Leads ANZ, NAB and RBC priced the A$1.25bn (US$1.13bn/Eu854m) benchmark covered bond at 53bp over three month BBSW, the tight end of guidance of the 55bp over area. This represents a concession of some 5bp, curve adjusted, to outstanding Australian major bank FRNs on a mid basis, according to a banker at one of the leads.

He said that at 53bp over, the deal came in line with where RBC’s most recent US dollar covered bond is trading, namely at 28bp over US dollar Libor.

RBC sold a $1.75bn three year SEC registered covered bond on 16 July, which kicked off a funding spree that took in a $2bn five year senior unsecured transaction and a Eu2bn seven year covered bond the following week, and then today’s Kangaroo.

Today’s deal is the first Australian dollar covered bond since November, when Suncorp-Metway sold a A$600m five year deal, and the first Kangaroo since September, when Stadshypotek sold a dual tranche five year transaction.

The lead banker said that RBC’s transaction is the largest covered bond by a Canadian bank in the Australian dollar market, and the issuer’s first deal in any asset class in the currency since 2007, when it sold a A$1.2bn three year senior unsecured transaction.

“The deal represents an important source of diversified funding for the bank away from its core North American markets,” he said.

Bank of Nova Scotia and Canadian Imperial Bank of Commerce (CIBC) are the other Canadian issuers to have sold Kangaroo covered bonds. [corrected to include BNS]

The RBC leads opened the order books on the deal late yesterday (Monday) local time, and gathered A$1.8bn of orders. Onshore investors took 70% of the bonds. Banks (including treasuries, private banks and central banks) were allocated 68%, and real money accounts 32%, according to one of the leads.

“Decisions around timing have been based around, firstly, the fact that the bank has recently activated its new covered bond programme to be compliant with the Canadian legislation enacted in late 2012,” said the lead banker. “Market conditions globally – and specifically in Australian dollars – have been strong lately and this has obviously influenced timing.”

RBC and CIBC were the first Canadian banks to have their programmes registered under the new legislative framework in Canada, with RBC having inaugurated the legal regime via issuance in US dollars, euros and now Australian dollars.