CIBC is pricing a Eu1.25bn three year covered bond today (Monday) on the back of a book of some Eu1.6bn for the first benchmark since Thursday’s ECB meeting, with a subsequent back-up in rates said to have helped the new issue even if markets were disappointed overall.

On Thursday European Central Bank president Mario Draghi announced that the earliest end date of the ECB’s asset purchase programme (APP) is being pushed back from September 2016 to March 2017 and that municipal bonds are being added to its public sector purchase programme (PSPP), alongside a 10bp cut in the deposit rate to minus 30bp. Markets had been pricing in an expansion of the APP and a potentially larger cut, and yields backed up in the aftermath of the announcements.

Syndicate officials said that it was therefore no surprise to see the three year part of the curve reopened by Canadian Imperial Bank of Commerce (CIBC) with the first euro benchmark in the maturity since SpareBank 1 Boligkreditt sold a Eu1.5bn three year on 5 November.

“The yield is positive, whereas beforehand it would have been negative,” said one. “It is much easier at the short end now.”

Another syndicate official agreed.

“That they can play and pay in plus territory is probably why this was deemed a good idea,” he said, noting that the three year swap rate, mid, was at around 2.5bp today. “It is still yielding around zero, but it is back from minus.”

Leads CIBC, Commerzbank, HSBC and UBS priced the Eu1.25bn (C$1.82bn) issue at 9bp over mid-swaps, following guidance of 10bp-12bp over, with the book reported at some Eu1.6bn based on late updates from the leads. Bankers away from the leads put the new issue premium at around 5bp.

“That is not overly generous,” said one, “but I would not expect a bigger premium for such a three year. And they have got a Eu1.6bn book and that without the ECB, so they can’t have done much wrong.”

Another banker said that the new issue was a smart move given that the ECB had confounded market expectations.

“People were quite muddled in trying to work out what they were meant to do post-ECB,” he said, “and this is a relative slam dunk rather than something longer where investors would have to take a view on where rates are going.”

He also noted that the deal offered attractive funding for the issuer, equating to funding some 4bp-5bp inside where he considered a new three year dollar benchmark would come.

CIBC’s last euro benchmark was a Eu1bn five year in January, while it sold a $1.2bn five year issue in July.

The Canadian bank’s mandate was announced on Friday afternoon and a syndicate official questioned whether this was necessary given low supply expectations and the chance of adverse developments before launch. However, another said that issuers retain flexibility if market conditions deteriorate and that it is always helpful to give market participants a heads-up.

Ahead of CIBC’s, the last euro benchmark was a Eu1.25bn short eight year for Crédit Agricole Home Loan SFH last Tuesday. Covered bond bankers said that they expect supply to remain subdued into year-end.

“I’d be surprised to see more,” said one, “but I wouldn’t rule it out. We don’t have anything at all in the pipeline and all the issuers we are pitching for next year tell us they are done for the year.”