Toronto-Dominion Bank could launch its inaugural euro legislative covered bond next week, with five years seen as the most likely maturity, after it yesterday (Wednesday) announced the mandate for a deal. Helaba doubled the size of a recent Eu500m seven year today (Thursday).

TD is the only Canadian legacy covered bond issuer that has yet to issue under the country’s legislative framework, having also been the last to have had a legislative programme registered with Canada Mortgage & Housing Corporation (CMHC), which happened only recently, on 25 June.

The issuer yesterday announced that it has mandated BNP Paribas and TD Securities as structurers and arrangers for its inaugural euro legislative issue. A banker close to the new issue project said that a deal could be expected as early as next week, subject to market conditions. Investor feedback in response to the mandate announcement has been “excellent”, he said.

The CBR understands that the maturity would probably be five or seven years, leaning more toward a five year. The issuer will not go on a roadshow, having carried out targeted investor work earlier this year. TD has already tapped the euro senior unsecured market this year, with a three year floating rate note, and earlier this week sold a short dated senior unsecured deal in the US market.

A syndicate official away from the TD covered bond mandate said that he would expect the issuer to opt for a five year deal and that he would expect a solid transaction, based on the secondary market performance of recent Canadian covered bond issues.

Canadian banks have been active in the benchmark covered bond market following CMHC registration of their legislative programmes, prioritising the euro market from which they had long been absent. Five euro deals for a total of Eu5bn have been launched so far this year. The most recent was a Eu1bn five year for Royal Bank of Canada, which was priced at 7bp over on 12 June and was today variously said to be trading at 5bp- 6bp over.

TD last issued a benchmark covered bond in March 2012, a US$3bn (C$3.22bn, Eu2.21bn) five year that came at 70.6bp over US Treasuries.

Another syndicate banker said that he would expect TD to issue a five year or seven year covered bond, noting that the seven year would suit investor appetite for yield. However, he added that a lack of benchmark supply would allow TD to “take its pick” regarding maturity.

He said that he would expect TD to be able to price a five year at 7bp over mid-swaps and a seven year at 12bp-13bp over, based on RBC 2019 and 2020 covered bonds trading at 6bp over and 10bp over, respectively.

A covered bond analyst noted that TD Bank’s issuer ratings are one to two notches higher than most of its Canadian peers’ at Moody’s and Standard & Poor’s, but that it has similar ratings at Fitch and DBRS. TD’s covered bonds are expected to be rated triple-A by Moody’s and DBRS.

Landesbank Hessen Thüringen (Helaba) priced a Eu500m tap of a 1.125% May 2021 public sector-backed Pfandbrief today (Thursday), taking the total issue size to Eu1bn. BNP Paribas, Citi, Deutsche Bank, Helaba, HSBC, Société Générale, UBS and UniCredit priced the increase at flat to mid-swaps, the tight end of guidance of the 1bp over area.

The deal was first launched at 3bp over in May as part of a dual tranche transaction alongside a Eu500m three year issue that was sold at 7bp through mid-swaps.

A syndicate banker at one of the leads said that the issuer had not wanted to “flood the market” when it went out with the initial issue in May and that the move to tap the deal today is similar to when Helaba last year in July increased by Eu500m a Eu500m five year Pfandbrief it had priced the previous month — again, as part of a two tranche deal, which also included a Eu500m 10 year tranche.

“Today’s tap follows strong secondary performance of the May issue, which has been trading at 1bp to 2bp through mid-swaps,” he said. “We had been aiming at a minimum Eu250m tap, but investor demand drove it to Eu500m and allowed us to double the size of the initial transaction.”

Syndicate officials away from the leads said that the tap appeared to be a success, and that it highlighted investor demand for covered bond supply.