The Covered Bond Report

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RBC takes £750m in follow-up to TD

Royal Bank of Canada (RBC) issued a £750m three year FRN today (Friday), following the pricing process used by compatriot TD for a £1bn three year yesterday while taking a smaller size, achieving a positive result in its own right while highlighting the benefit of being the first mover, said bankers.

RBC imageLeads HSBC, NatWest, RBC and Santander launched the deal this morning with guidance of the three month Libor plus 30bp area. The leads later announced that books had exceeded £600m, and subsequently set the spread at 27bp with books above £900m. The size was later fixed at £750m (EUR854m, C$1.29bn).

“It’s another good deal and it shows there is clearly good momentum in the sterling market right now,” said a syndicate banker away from the leads.

Toronto-Dominion’s £1bn three year FRN yesterday (Thursday) attracted over £1.2bn of demand, including £25m JLM interest, and was also priced at 27bp over three month Libor, down from initial guidance of the 30bp area (see separate article for more). Syndicate bankers said TD had attracted greater demand thanks to the first mover advantage.

Although smaller than TD’s deal, syndicate bankers said the size of RBC’s new issue was impressive, as sterling covered bond issues from Canada have tended to be of £500m or less. The new issue is RBC’s largest sterling covered bond to date.

“If there was no direct peer comparison, you’d have to say taking out £750m at this spread is a very good result,” said a syndicate banker away from the leads. “It’s just that the advantage of being a first mover is clear in the size break between the two.”

Syndicate bankers away from the leads said RBC paid a new issue premium of around 2bp, based on the Canadian sterling covered bond curve.