Toronto-Dominion Bank reopened the euro covered bond market to larger and non-German issues yesterday (Monday) with a Eu1.25bn five year deal that an official at the Canadian bank said achieved a strong outcome given the overall backdrop.

The deal was the first non-Eurozone euro benchmark in six weeks, after a Eu500m seven year issue for Norway’s Sparebanken Vest Boligkreditt on 22 April. Since market volatility struck the following week euro benchmark issuance until yesterday had been almost exclusively German and all sub-Eu1bn.

Market participants said that although several issuers had been eyeing the market as it stabilised at the end of last week, most had not wanted to brave the primary market until another issuer had tested it, and the Canadian bank was the first to take the plunge.

“We were pretty confident heading into the transaction,” said Christina Wang, head of funding management, treasury and balance sheet management at TD. “We know the European market has not been as active for covered bonds recently, especially with no non-euro issuers for some time and even European issuers haven’t been doing large size deals, and we understand that in a volatile market you need strong leadership to get a deal done.

“With the great TD name, the TD credit and the amount of investor work that we have done to date – all those factors together with a great syndicate that we had in place led to the success of this transaction.”

Leads BNP Paribas, Credit Suisse, Lloyds and TD went out with initial price thoughts of the flat to 2bp area over mid-swaps, then guidance of the flat area, before re-offering the paper at 1bp through mid-swaps on the back of a book of some Eu1.6bn comprising 82 accounts. The deal tightened 2bp in the aftermarket yesterday afternoon, according to a banker at one of the leads.

Syndicate bankers at and away from the leads put the new issue premium at 5bp-7bp, with one saying that the issue contributed to a widening of a couple of basis points in secondaries, but another suggesting that such a new issue premium is “the only way to get things going if you try to issue a 1bn(+) deal”.

“We came out with a level that was a little wider just to make sure investors understood that we were very sincere about getting a solid deal done and the feedback we got was quite constructive,” said Wang, “so I think the syndicate did a good job of recommending that and getting us to the right result.

“Demand was perhaps not as overwhelming as previously,” she added, “but we have issued several times now and to get over 80 investors in the deal was a strong outcome in this overall backdrop, and Eu1.25bn was pretty much right in line with what we wanted to get out of the deal.”

The Eu1.25bn size is only the second single-tranche euro benchmark covered bond larger than Eu1bn since the first full week of the year, with TD’s last euro benchmark, a Eu1.25bn seven year on 17 April, having been the first.

Banks and private banks were allocated 46% of the paper, central banks and official institutions 23%, asset managers 18%, insurance companies and pension funds 9%, and others 4%. Germany and Austria took 30%, the UK 21%, the Benelux 14%, the Nordics, Switzerland and France 9% each, Asia 6%, and others 2%.