Toronto-Dominion attracted final demand of over EUR1.4bn of demand to a EUR1.25bn (C$1.98bn) short five year covered bond today (Monday) that divided opinion, some bankers noting the Canadian achieved both size and price, others pointing to limited scope for performance.

Leads Crédit Agricole, Commerzbank, Credit Suisse, HSBC and TD launched the January 2023 issue with guidance of the mid-swaps minus 2bp area this morning. Around one hour and 10 minutes later, the leads announced that books had exceeded EUR1bn.

They subsequently set the spread at minus 5bp with books at EUR1.5bn. The size was later set at EUR1.25bn, with the final books above EUR1.4bn.

Syndicate bankers away from the leads had differing takes on how the deal went.

“It seems from the outside like an assured execution,” said one. “From the early book update it was clear they would be able to get both the size and price that you would have expected TD to aim for.

“It looks like they didn’t have to compromise on either.”

Another syndicate banker away from the leads was less impressed, however, noting that the deal was in the end oversubscribed by “barely 10%”.

“It is no secret therefore that this will not be the most cracking of trades on the secondary market,” he said. “Printing EUR1.25bn out of a book of EUR1.4bn will mean they have to fill every account in full, more or less.”

Bankers said there were two ways of calculating fair value for the new issue that produce contrasting results, with the spread seeming substantially more generous versus TD’s own secondaries than versus the last Canadian five year.

“Again, the question in this strange market is what is the most relevant secondary,” said a syndicate banker away from the leads. “I get the feeling that most people looked at the most recent comparable.”

The deal is the third euro benchmark covered bond from Canada this year, and the second in the five year part of the curve, following a EUR1.25bn straight five year for CIBC on 17 January.

That January 2023 issue was also priced at 5bp through mid-swaps and seen at minus 7bp-6bp, mid, today, implying that the new issue offered a premium of 1bp-2bp, according to syndicate bankers.

“That is a fairly meagre premium when you consider that even CBPP3 influenced deals have recently paid in the context of 3bp-4bp,” said one.

However, TD April 2023s were seen at around minus 9bp, implying a new issue premium of around 4bp versus the issuer’s curve.

“Against that level, the final spread looks much more generous and is in line with recent trades,” said another syndicate banker.

The spread of the new issue is the joint-tightest for a Canadian euro benchmark covered bond, matching the record set by CIBC’s slightly longer dated deal.

Bankers added that demand for the trade will have been supported by a relative lack of euro-denominated five year supply. Prior to today’s deal, only seven new euro benchmark covered bonds have been issued in the five year part of the curve this year, totalling EUR6.5bn, or 18% of year-to-date supply. Both the seven and 10 year buckets have been more heavily used.

The new issue is TD’s second benchmark covered bond of the year, following a £500m five year FRN on 22 January.

Commerzbank announced this afternoon that it has mandated BayernLB, BBVA, Crédit Agricole, Commerzbank and LBBW to lead manage a EUR500m no-grow seven year Pfandbrief. The deal is expected to be launched tomorrow, subject to market conditions.

Syndicate bankers at the leads saw Commerzbank July 2024s at minus 19bp, mid, September 2025s at minus 18bp, and June 2026s at minus 17bp. They also cited as comparables MünchenerHyp June 2024s at minus 20bp, March 2025s at minus 19bp, April 2026s at minus 19bp, and Helaba August 2024s and January 2027s both at minus 21bp.

The deal will be Commerzbank’s first new euro benchmark Pfandbrief since August, when it sold a EUR750m 10 year, which it tapped by EUR250m in September.