TD followed BNS and RBC into the dollar market yesterday (Thursday) with an inaugural legislative, $1.75bn (Eu1.36bn, C$1.92bn) five year covered bond that enjoyed a $2bn book, but whose ultimate pricing was said to have been affected by its 144A status.

Leads BNP Paribas, Citi, RBC and TD Securities went out with initial price thoughts of the 30bp over mid-swaps area for Toronto-Dominion’s deal before tightening guidance to 28bp-29bp, but then priced it at the wide end of this range, at 29bp over.

This compared with a 27bp over spread achieved by Royal Bank of Canada for a similarly sized and priced, $1.75bn five year on Tuesday, and 29bp for a $1.5bn five year Bank of Nova Scotia issue two weeks ago. Those two Canadian deals, each of which were SEC-registered, were said to have been trading at around 25bp over at the time TD announced its deal.

“I was surprised to see TD come 2bp back of RBC,” said a syndicate official away from the leads. “I thought they’d have been a bit more sensitive to that. I’m surprised they didn’t do less but tighter.

“I’m not sure why they started with IPTs of the 30bp area and then priced at the wide end of 28bp-29bp – if you move to 28bp-29bp, you should be confident you are going to hit 28bp, really.”

A banker at one of the leads said that the deal had gone very well and, with a book just over $2bn, had enjoyed solid demand.

Regarding the pricing level, he said: “That was purely explained by the 144A nature of this deal.”

“TD is not quite there on the SEC front at this point in time,” he added, “but it saw the opportunity to do something in dollars and wanted to take advantage of that. And while some investors see TD as arguably the better credit, they wanted something extra to compensate for the 144A.”

He said that, as with recent deals, demand was skewed towards bank treasuries.

The deal takes US dollar benchmark covered bond supply for the month to $6.25bn and for the year as a whole to $9.25bn, with three Australian issues making up the balance of supply alongside the latest three Canadian transactions.

“Covered bond issuance is still very low,” said the lead syndicate official.

However, he said he hoped that, given spreads in general were improving, there could be more Canadian supply as they now all have their CMHC-registered programmes up and running – with TD’s issue having been its first off its new programme in dollars. He noted that the Canadians have recently been busy in other currencies, with TD turning to dollars after debuts in euros and sterling.

“In five years, dollars is quite compelling,” he added, “with sterling competitive for the short part of the curve, and, particularly with the purchase programme, euros being in favour further along the curve. That’s how I’d kind of expect to see things pan out.”