A Bank of Montreal Eu1bn (C$1.5bn) seven year issue launched this (Monday) morning was seen as having struggled to find traction after significant recent Canadian supply, although syndicate officials expect further new covered bond issuance from across jurisdictions soon.

Bank of Montreal leads BMO, BNP Paribas, Commerzbank and HSBC priced the Canadian issuer’s Eu1bn seven year deal at 17bp over mid-swaps, in the middle of initial price thoughts and guidance. The final order book size was not disclosed.

Syndicate officials away from the leads said the result was weaker than recent Canadian trades, noting the execution had progressed slowly. They said there has been a significant amount of Canadian issuance since the summer, including deals in the senior unsecured market, suggesting demand for such paper was running low.

The new issue is Bank of Montreal’s fourth sizable public covered bond of 2015 – following two Eu1.5bn five year deals sold in January and July and a £325m three year debut sterling FRN, also in January.

“I am surprised by what the lack of spread movement implies for this deal,” said a syndicate official away from the leads.

He noted the last Canadian trade, a Eu1.25bn five year from RBC, had gone well while offering a final spread of 9bp and that BMO’s August 2020s had been priced at 7bp one and a half months ago.

“A 10bp move for two years is quite something,” he said. “It goes to show the spread volatility we have seen in recent months.”

“But this is still surprising.”

Another syndicate official estimated fair value for BMO’s new issue was around 11bp-12bp, and suggested some investors may have opted for a Eu1bn 10 year Kutxabank trade in the market this morning due to the more attractive spread (see separate article).

“As a starting point, 17bp seemed fine,” he added. “For me this deal, in line with what we saw from trades last week, show that appetite is beginning to wane slightly.

“A couple of weeks ago we had that repricing of levels that reengaged investors, but then last week was pedestrian and now that investors know more deals are coming they will be more selective.”

Syndicate officials said that new deals are likely to be brought to market tomorrow (Tuesday), adding they were surprised more intraday executions had not been launched today, as issuance is expected to be frontloaded this week ahead of a Federal Reserve meeting on Thursday.

Bankers noted, however, that while many deals are in the pipeline with issuers having announced mandates last week, roadshows for anticipated issues from SR Boligkreditt, BAWAG and Hypo Tirol will run until later this week or next, likely ruling them out of tapping the market ahead of the Fed meeting.