Toronto-Dominion Bank (TD) issued the tightest Canadian euro benchmark in almost two years today (Thursday), a Eu1.25bn seven year covered bond that benefitted from an upturn in sentiment and modest Canadian supply. Yorkshire Building Society has meanwhile mandated for a deal due in April.

The Canadian bank’s new issue was launched into a wider market that was stabilising after a softer session yesterday (Wednesday), and was among a range of deals to benefit from a return of risk-on sentiment, hitting screens slightly earlier than a Eu500m short six year covered bond for Poland’s PKO (see separate article).

“Contrary to yesterday, today was a good day to come to the market, looking at broader risk assets,” said a banker at one of TD’s leads. “Yesterday there were concerns feeding over from the US, concerning Trump and whether he will be able to deliver on his growth-boosting promises, but that wasn’t a factor today and markets were positive across all sectors.”

Leads BNP Paribas, Danske, LBBW, Société Générale and TD launched the seven year issue with guidance of the 4bp over mid-swaps area this morning. After just over one hour, they announced that books had exceeded Eu1.25bn. Guidance was later revised to the 1bp area, plus or minus 1bp, with books in excess of Eu1.9bn, before the spread was fixed at flat. The size was later set at Eu1.25bn (C$1.8bn).

It is the tightest euro benchmark covered bond from Canada since June 2015, when TD priced a Eu1.25bn five year issue at minus 1bp, and the tightest with a maturity of seven years or longer since April 2015, when TD priced a Eu1.25bn seven year at minus 2bp.

“It’s a great price on the back of great books,” said a syndicate banker at one of the leads. “We are very happy with the 4bp move in the spread.”

Bankers said demand was probably supported by relatively low euro supply from Canada so far this year. The deal is the second euro benchmark covered bond from Canada in 2017, following a Eu1.25bn five year issue on 9 January. Between January and March last year Canadian issuers sold Eu6.25bn of euro benchmark covered bonds, half of the 2016 total of Eu12.5bn.

Canadian issuers have so far this year been more active in the US dollar and sterling covered bond markets. Toronto-Dominion has already tapped both currencies, issuing a $1.75bn five year on 9 January and a £250m short five year on 6 March.

Bankers calculated that the deal offered a new issue premium of 1bp-2bp, seeing TD April 2022s at minus 6bp, mid, and April 2023s – its longest dated benchmark outstanding – at minus 4bp. They also saw Bank of Montreal October 2023s at minus 2bp and Bank of Nova Scotia March 2023s at minus 3bp.

“They probably could have gone even tighter to the curve,” said a syndicate banker away from the leads. “But it looks like they wanted to max out the size rather than pushing it further.”

Yorkshire Building Society yesterday (Wednesday) afternoon mandated HSBC, Lloyds Bank, UBS and UniCredit to arrange a series of investor meetings ahead of a Eu500m no-grow six year covered bond.

The roadshow will commence on Tuesday and conclude on Friday of next week (31 March), visiting the Netherlands, Helsinki, Copenhagen, Frankfurt and/or Munich, Cologne and/or Dusseldorf and potentially London.

The deal will be Yorkshire’s first benchmark covered bond since November 2015, when it sold a Eu500m 10 year.

Since the Brexit vote last June and the launch of the Bank of England’s related Term Funding Scheme, two euro benchmark covered bonds have been sold out of the UK – a Eu500m seven year for Coventry Building Society on 5 January and a Eu1bn seven year for Nationwide Building Society on 16 February.

The UK issuer joins a pipeline already including Hypo Noe, which will complete a roadshow tomorrow (Friday) ahead of an expected Eu500m six or eight year issue, as well as Commonwealth Bank of Australia and Westpac NZ, which will start roadshows on Monday ahead of expected euro benchmark offerings.