Canadian Imperial Bank of Commerce priced a A$700m long three year FRN today (Thursday), having found sufficient demand to print a deal more than twice the size of its minimum target, and CIBC’s Wojtek Niebrzydowski said the deal was “optimal” in terms of cost effectiveness and diversification.

The new issue is CIBC’s seventh benchmark covered bond in the currency since 2010, when the Canadian bank reopened the Australian dollar covered bond market for the first time since the financial crisis. Its last Australian dollar benchmark came in April 2016.

“CIBC has been an active covered bond issuer in Australian dollars since 2010, when we were credited with helping to establish the market post the financial crisis,” said Niebrzydowski, vice president, treasury, at CIBC. “As such, given the relatively attractive spread levels, including the cross-currency component, we decided to come back to the market with our seventh benchmark.”

Leads CBA, CIBC, HSBC and NAB opened books for a December 2020 fixed and/or floating rate issue yesterday (Wednesday) morning with initial price thoughts of the 55bp area over swaps and/or three month BBSW. The leads announced yesterday that the book had seen “strong growth” with demand in excess of A$400m, skewed towards the FRN tranche, while guidance remained unchanged.

Ahead of the Australian open this morning, it was announced that books were in excess of A$570m, with demand still skewed towards the FRN. The book closed at 12:00 and the issuer ultimately printed a A$700m (Eu466m, C$698m) FRN at 55bp over three month BBSW.

“The deal generated broad demand in Australia and to a lesser degree Asia,” said Niebrzydowski. “We are pleased with the outcome.”

Niebrzydowski said the deal offered a 7bp-9bp saving versus an equivalent euro-denominated deal, but was 2bp-3bp more expensive for the issuer than an equivalent US dollar trade.

“Having said that, there have been very few if any three year transactions in either currency, so it is a bit hypothetical,” he added. “The other point is that since we were not looking for a billion-plus deal – in which case we would likely have looked outside of the Australian dollar market – and we had in July executed a $1.75bn trade, this was an optimal transaction from the standpoint of cost effectiveness and market/investor diversification.”