National Bank of Canada attracted over EUR950m of orders to a EUR750m seven year covered bond today (Tuesday) and, following a EUR1.25bn short five year for TD yesterday, took year-to-date Canadian supply above that of the whole of 2017.

With today’s deal, EUR4.25bn of euro benchmark covered bonds have now been issued out of Canada year-to-date, across four trades, up from EUR4bn in the whole of 2017. Canadian covered bond supply had been widely expected to increase this year, given an increase in banks’ issuing capacity and on the back of greater redemptions.

“It’s interesting to see Canadian banks choosing euro benchmarks as their first deals post-results,” said a syndicate banker. “That demonstrates that this market remains an important funding source for them.”

NBC’s new issue was launched with guidance of the 2bp area over mid-swaps this morning. After around two hours, the leads announced that books had surpassed EUR750m, including EUR35m joint lead manager interest. The spread was subsequently set at flat and the size at EUR750m (C$1.2bn, US$924m) with books over EUR950m.

BNP Paribas, HSBC, LBBW and NBC were leads.

“To print at swaps flat is a pretty good result for NBC,” said a syndicate banker away from the leads.

Bankers noted that Canadian banks tend to print deals of EUR1bn or more in the euro covered bond market, but that NBC’s last euro benchmark, a six year in September 2016, was also EUR750m-sized.

“That partly reflects that NBC is simply a smaller bank,” said one. “This smaller deal probably suits them.”

Syndicate bankers said NBC’s deal offered a new issue premium of around 5bp versus the issuer’s extrapolated curve, seeing NBC March 2021s at minus 10bp, mid, January 2022s at minus 9.5bp and September 2023s at minus 8bp.

However, some syndicate bankers said the most appropriate comparable was Bank of Nova Scotia’s January 2025s, the last Canadian seven year, having been priced in January, which were seen at minus 3.5bp. They said this implied a final premium of around 3bp.

NBC’s new issue comes one day after compatriot Toronto-Dominion issued a EUR1.25bn short five year covered bond. The deal was priced at minus 5bp with a final book of over EUR1.4bn, and seen at around minus 6bp, mid, today.

“It shows how much the steepness of the curve between five and seven year transactions has increased for Canadian names,” said a syndicate banker. “Now the gap has widened to 5bp, up from as little as 2bp-3bp six months or even two or three months ago.

“That shows investors are a little more comfortable in five years than in sevens.”

As with NBC’s new issue, bankers yesterday differed on the most appropriate comparables for TD’s deal.