CBA priced a £350m December 2021 fixed rate sterling issue today (Thursday), following a similar trade for RBC yesterday, and pbb issued a £250m three year FRN in an arbitrage-driven flurry of sterling supply, although a $1.75bn issue for BMO yesterday afternoon showcased greater depth in dollars.

Today’s sterling-denominated deals make it the third consecutive day of sterling supply since the UK market opened on Tuesday, with Royal Bank of Canada having yesterday (Wednesday) priced a £500m December 2021 issue at 63bp over Gilts on the back of orders approaching £550m.

“In sterling covered bond terms, this has been quite a flurry of activity,” said a syndicate banker. “Arbitrage has been the main driver, with sterling offering substantial savings versus both euros and dollars.”

Commonwealth Bank of Australia leads CBA, HSBC and Nomura launched the sterling benchmark December 2021 issue with guidance of the 67bp over Gilts area, before fixing the spread at 67bp on the back of orders in excess of £350m. The size was later set at £350m (Eu412m, A$592m).

“This was a good, opportunistic trade,” said a banker away from the deal. “It’s fairly clearly a copycat of RBC, and bearing in mind that RBC found quite good demand, it’s not a bad idea.

“The wider spread and lower demand just reflects the different standing of Canadian and Australian issuers in this market.”

Deutsche Pfandbriefbank (pbb) leads Barclays, Credit Suisse and Nomura launched the three year sterling floating rate note (FRN) with guidance of the 55bp over three month Libor area. The deal was re-offered at 55bp with books in excess of £300m, before the size was fixed at £250m.

“It’s gone very well, paying a pretty slim premium,” said a syndicate banker at one of the leads.

He saw pbb September 2017s quoted in the low 30s. He put fair value for the new pbb issue in the low 50s, based on the secondary levels of Nordic sterling paper and a typical differential of around 20bp between pbb and Nordic names.

Canadian issuer CIBC priced a £300m five year FRN at 43bp on the back of £350m of orders on Tuesday. Bankers noted that investor demand was greater in the fixed rate segment.

Bank of Montreal priced the first dollar covered bond of the year yesterday. Leads BMO, Barclays, HSBC and TD opened books for the US dollar five year issue with initial price thoughts of the low/mid 60s over mid-swaps area. The deal was then priced at 60bp over mid-swaps yesterday afternoon, New York time, and the size fixed at $1.75bn (Eu1.68bn, C$2.34bn).

“It’s a good size, and it shows there’s good demand out there for the dollar covered product,” said a syndicate banker away from the leads. “In what has already been a record week for dollar issuance overall, it’s evidence that there’s also space for covered bonds as an asset class.”

Bankers said the final spread offered a saving of around 5bp compared to what BMO would have been able to achieve in euros.

“The sterling market still has the advantage though, as a sterling trade would offer closer to 55bp, dollar equivalent,” said a banker away from the deal. “But clearly, this trade shows just how much more you can get in terms of size in the dollar market.”

The last dollar benchmark covered bond was a $1bn five year for National Australia Bank on 30 November.