Toronto-Dominion today (Wednesday) showed that, in spite of broader market turbulence, the covered bond market remains open for benchmark issuance with a EUR1bn seven year deal that attracted over EUR1.3bn of orders, after having adjourned amid more volatile conditions yesterday.

Toronto-Dominion (TD) announced a mandate on Monday morning for a seven year euro benchmark covered bond. However, the Canadian bank and its leads decided not to launch the deal yesterday morning as the chaos of the Italian sell-off spilled over into other markets, and instead elected to wait for a stronger open.

Following a stabilisation of concerns over Italy and a steadier start today, leads BNP Paribas, ING, TD, UBS and UniCredit launched the deal this morning with guidance of the mid-swaps plus 10bp area. The spread was later fixed at 8bp and the size at EUR1bn with books over EUR1.3bn.

“To get over EUR1.3bn of demand and take EUR1bn is a pretty good result, all things considered,” said a syndicate banker away from the leads. “The outcome surely vindicates the decision to hold off yesterday and go again today.”

Some syndicate bankers suggested that TD would in better market conditions usually print a larger trade – four of its last six euro benchmarks were EUR1.25bn issues – and would often attract a larger book, but said the outcome was nevertheless a decent result in the circumstances.

Markets were calmer today, with Italian government bonds rallying today on the back of a renewal of talks to form a coalition Italian government and an auction of new BTPs going smoothly this morning. However, TD’s deal was still the only euro-denominated benchmark deal live in the financials space today.

“Even though execution risk was clearly lower this morning than yesterday, you probably wouldn’t have wanted to be in the market with anything riskier than a covered bond today,” said a syndicate banker away from the leads.

The final spread of 8bp was seen as incorporating a new issue premium of around 6bp, with bankers citing TD April 2024s – the issuer’s longest dated outstanding – at 1bp, mid, and National Bank of Canada March 2025s – the last seven year benchmark from Canada, having been issued on 6 March – at 2bp. Syndicate bankers said the premium was in line with those paid by issuers last week and was appropriate given the challenging market conditions.