CIBC attracted some EUR1.6bn of orders to a EUR1.25bn five year covered bond today (Wednesday) despite paying the tightest ever Canadian spread and a slim premium, proving demand for fives to be deep, with two big non-CBPP3-eligible deals being absorbed in two days.

A EUR1.5bn issue for DNB Boligkreditt yesterday (Tuesday) was the first euro benchmark five year covered bond of the year, with supply having previously been focussed in intermediate and longer maturities. The Norwegian issuer’s trade is the largest covered bond of the year so far and built one of the biggest books, of some EUR2.2bn, which bankers said paved the way for further shorter dated supply.

The new issue for Canadian Imperial Bank of Commerce was launched by leads CIBC, Commerzbank, HSBC, Natixis and UBS with guidance of the mid-swaps minus 2bp area this morning. The spread was ultimately fixed at minus 5bp – the tightest ever on a euro benchmark covered bond from Canada – and the size at EUR1.25bn on the back of EUR1.6bn of orders.

The deal is the second Canadian euro benchmark covered bond of the year, following a EUR1bn seven year issue for Bank of Nova Scotia on Friday. BNS’s deal was priced at minus 4bp – then the joint-tightest Canadian spread – and seen trading around re-offer today.

CIBC’s final spread was seen as incorporating a new issue premium of around 1bp based on the issuer’s curve, with bankers citing CIBC July 2022s at around minus 8bp, mid. They noted this premium is at the smaller end of those paid by recent transactions, with most new benchmarks having offered around 3bp concession.

“It’s a good price, and given the book they probably could have gone even tighter and paid no new issue premium – like the trades we were seeing at the end of last year – if they hadn’t also been targeting a larger print,” added a banker away from the leads.

Bankers attributed the strong demand for the new issue to the relative rarity of euro-denominated paper from CIBC – the new issue being its first euro benchmark covered bond since July 2016 – and the recent undersupply of euro five years.

“That is two big five year deals in two days, of which neither had the support of the ECB,” said a syndicate banker. “It shows that there continues to be deep demand in that part of the curve.”

Such shorter-dated paper has become more attractive, bankers said, on the back of a rise in yields over the last month. CIBC’s new issue had not been priced when The CBR went to press, but bankers said that with the five year swap rate at around 37bp this afternoon, the deal would be priced with a positive yield.

CIBC’s previous euro benchmark in July 2016, a EUR1.25bn six year issue, was priced with a negative yield at a time of even lower rates.

“That shows how far the market has come away from those lows in the last year and a half,” said a syndicate banker. “For investors, yields in five years are of course meagre, but still a relief compared to what we had in mid-2016.”