Royal Bank of Canada had the benchmark covered bond market to itself this (Thursday) morning, drawing more than Eu1.25bn of orders for a Eu1bn no-grow five year that will be priced at 7bp over, 2bp wide of where it sold a Eu1.5bn five year in October.

Leads Deutsche Bank, Natixis, Royal Bank of Canada and Société Générale went out with initial price thoughts (IPTs) of the 10bp over mid-swaps area before setting guidance at the 8bp over area and the size as a Eu1bn no-grow. Indications of interest were in excess of Eu1bn. The spread was later fixed at 7bp over, with more than Eu1.25bn of orders in the book.

A syndicate banker at one of the leads put fair value at 6bp over, indicating little to no new issue premium. He said that for comparables the leads looked at a RBC October 2018, today at 2bp over, a RBC August 2020 trading at 10bp over, and Bank of Montreal and Bank of Nova Scotia 2019s each trading at 6bp over.

Today’s deal is the first from RBC since October 2013, when it priced a Eu1.5bn five year at 5bp over. Syndicate officials away from the leads noted that the October 2013 issue had underperformed, at one point widening to 11bp over in the secondary market.

A syndicate official away from today’s deal said that he felt that 8bp over would be fair, 7bp would be OK, but that 6bp would have been pushing too far in light of RBC’s previous issue.

A syndicate official at one of the leads said that the outcome of RBC’s last euro benchmark had little impact on today’s transaction, but that the issuer was mindful of not opting for too large a deal.

The new issue came after Moody’s yesterday placed Canada’s seven largest banks, including RBC, on negative outlook given the Canadian governments plans to introduce a bail-in regime. A syndicate official away from the leads said that he did not expect this to have an impact on RBC’s deal.

RBC’s deal is the fourth benchmark covered bond this week, after new issues for Mediobanca, Crédit Mutuel-CIC Home Loan SFH and Deutsche Kreditbank. Syndicate bankers suggested any further deals could come at short notice with issuers appearing to take an opportunistic approach.

“The roadshow-prepared deals have become something of a rare breed, recently,” said one. “I certainly have nothing in my pipeline, but, that said, I expect to see deals pop up rather opportunistically. People, watch out.”