A CIBC $1.75bn five year benchmark last week is the tightest since the issuer tapped the currency in 2015, and allowed it to renew its presence in US dollars after a longer hiatus than it would have liked, according to CIBC’s Wojtek Niebrzydowski. Canadian capacity has meanwhile increased.

The new issue last Thursday is Canadian Imperial Bank of Commerce’s (CIBC’s) first benchmark US dollar covered bond since July 2015, when it sold a $1.2bn five year 144A issue.

“We believe it is important to maintain a presence as an issuer in selective markets, and as such, a two year hiatus was probably longer than we would like, everything else being equal,” said Niebrzydowski, vice president, treasury, at CIBC. “The recent deal brings us back to the US dollar market and extends our credit curve.”

Leads CIBC, Citi, HSBC and UBS launched the five year fixed rate 144A/Reg S issue with initial price thoughts of the low 50s over mid-swaps after the European open on Thursday morning. The price was set at 47bp and the size at $1.75bn (Eu1.50bn, C$2.19bn) after the US open. The book closed at $2.5bn.

“The deal was very well received, as evidenced by the book size reflecting investor demand from both Europe/Asia and North America,” said Niebrzydowski.

The new issue is the tightest benchmark US dollar covered bond with a maturity of five years or longer since CIBC’s deal in July 2015, which was also priced at 47bp.

“In relative terms, we believe it was comparable in euros and 2bp-3bp wider than we had achieved in sterling,” added Niebrzydowski.

Since its last US dollar deal, CIBC has focussed its covered bond issuance mainly in the euro and sterling markets, having sold two sterling-denominated trades this year, the last a £525m five year issue on 10 July – just 10 days before the new dollar issue. Niebrzydowski said the issuer may access the covered bond market again this year.

Year-to-date non-domestic benchmark Canadian covered bond issuance stands at Eu9.68bn equivalent, comprising three trades denominated in US dollars ($5.25bn), five in sterling (£2.4bn) and two in euros (Eu2.5bn).

This is less than half of last year’s total non-domestic benchmark issuance of Eu22.9bn equivalent, comprising five denominated in US dollars ($8.75bn) seven in sterling (£2.35bn), 10 in euros (Eu12.5bn) and one in Australian dollars (A$400m). All but five of these deals were issued between January and July 2016.

Maureen Schuller, head of financials research at ING, said Canadian banks now have increased scope for covered bond issuance due to heavy redemptions of Canadian legacy structured covered bonds this year and growth in issuers’ balances sheets, which gives increased leeway under caps enforced by OSFI/AMF that limit issuance at 4% of bank assets.

Canadian issuers have room to issue C$64bn (Eu43.9bn) in covered bonds, according to Schuller, some Eu12bn more than they had around this time last year.

“Even smaller issuing entities, such as National Bank of Canada and Caisse Centrale Desjardins, now have sufficient room to print new debt within their limits,” she said. “Therefore, we do expect to see some more issuance from Canadian banks in the second half of the year, with a further Eu5.5bn equivalent in Canadian covered bond repayments due through until the end of this year.

“Our 2017 supply estimate for Canadian euro benchmark covered bonds is now Eu6bn.”

However, Schuller noted that other currencies offer more attractive funding costs for issuers than euros.