CIBC sold a £500m three year FRN today (Wednesday), with the debut offering it savings of several basis points versus potential dollar and euro trades, according to an official at the bank. Meanwhile, Westpac is expected to launch the first euro benchmark of 2015 tomorrow.

Leads Barclays, CIBC and HSBC priced the £500m January 2018 Canadian Imperial Bank of Commerce issue at 19bp over three month Libor, tightened from the 20bp area, on the back of a book of over £625m, according to a syndicate official at one of the leads.

The deal comes after Barclays on Monday priced at £1bn three year FRN at 19bp over and Bank of Nova Scotia yesterday (Tuesday) tapped a £250m November 2018 FRN by £300m at 18bp over.

The lead syndicate official said that CIBC pricing £500m (Eu638m, C$896m) flat to Barclays was a very good result – possibly aided by the UK bank pricing its £1bn after selling a £1.5bn three year FRN in September – and one that would be encouraging for other non-UK names looking at the sterling market. He said that the larger size of CIBC’s deal versus BNS’s and slightly longer maturity justified the 1bp higher spread paid by CIBC.

Wojtek Niebrzydowski, vice president, treasury, at CIBC, echoed this.

“This is our inaugural trade, is bigger and slightly longer,” he told The CBR, “and all in all we are quite satisfied with the pricing and the size, of both the book and the deal, which were in line with our expectations.”

He said that the economics of the sterling transaction made it attractive versus euros and US dollars, estimating a saving of around 7bp-9bp versus a euro benchmark and 3bp-4bp versus a dollar benchmark. Niebrzydowski added that the size flexibility of the sterling market versus the dollar and euro markets is also interesting for the issuer, noting that CIBC had been considering a sterling transaction since autumn 2013, when it held some investor meetings. Since then, however, CIBC was relatively subdued in its issuance globally, selling only a A$500m issue in October 2013 and a Eu1bn benchmark in October last year.

“But sterling has always been on our radar,” said Niebrzydowski. “Obviously to a large degree this is being driven by economics, but also we try to be active and present in all currencies where there is appetite for this asset class and our name.

“The economics have been there in sterling for the last couple of months,” he added, “and to the extent we were planning some term funding activity out of this platform in 2015, it was an obvious choice.”

The lead syndicate official noted that the sterling market had gotten off to a great start for 2015, while many sectors are experiencing volatility and with uncertainty set to rise as the month progresses. He said that a lot of cash had built up in the UK market at the end of 2014 and this was now ready to be put to work.

In contrast, benchmark euro issuance has yet to start, although that is set to change tomorrow after a Westpac euro benchmark was announced today and due for launch in the near future, with BNP Paribas, JP Morgan and UBS as leads. A deal for Westpac tomorrow would be the first euro benchmark since a Eu1bn long seven year Cariparma deal on 3 December – the only public euro benchmark announcement so far this year has been a National Bank of Canada mandate for a European roadshow, which is due to start on Monday.

A syndicate official away from the leads said that it will be interesting to see where the deal comes. He said that the last Australian seven year benchmark, a Eu1bn Commonwealth Bank of Australia transaction issued at 7bp over on 21 October, was today bid at 11bp, with other Australian seven year paper at a similar level. He said that a Eu1bn March 2021 deal that was Westpac’s last euro benchmark was trading at around 7bp over.

“Personally I think that they have to offer a few basis points over their curve,” he said. “They are not enjoying the support of the ECB covered bond purchase programme, in contrast to all the Europeans coming at year-end, so they have to cater to real investors who may be more price sensitive than the central banks.

“In order to stand a good chance of working properly, the mid to high teens over mid-swaps would be a proper starting point and then see how it goes. My personal hope for a trade of that category would be somewhere in the 13bp-15bp area, and if they come up with something along those lines they probably stand a good chance of getting it sold.”