In a fraught period where few issuers ventured into the market, TD scored an impressive funding hat-trick, hitting its favoured maturities in one week, with EUR1bn seven year and £1bn three year covereds following a C$2.25bn five year senior, its sterling record breaker in particular exceeding expectations, its head of funding told The CBR.

Shortly after reporting its results on Thursday of last week, Toronto-Dominion (TD) announced a mandate on Monday morning for its seven year euro benchmark covered bond. This week represented the first open week for most Canadian issuers following their blackout periods.

“We were trying to plant our flag in the sand and get out in front of competing supply,” said Cameron Joynt, head of funding at TD. “We were thinking that some of our peers here might have been thinking about some of the same trades we were.”

On Tuesday morning, however, markets descended into turmoil on the back of the sell-off in Italian government bonds, and TD decided to hold off on the issuance. Markets remained quiet, with a sub-benchmark, EUR300m issue for Austria’s Oberbank the only deal to go ahead in the euro covered bond space.

“The covered bond is a safety product, but at the same time you don’t really want to issue into that kind of news or that kind of backdrop, worrying that you’d have money that would want to stay on the sidelines,” said Joynt. “We made the decision not to go and the day continued to deteriorate, so we were very pleased to have not been in the market on one of the most volatile days in months, if not years.”

Conditions were more stable at Wednesday’s open as more reassuring headlines emerged out of Italy, and TD and leads BNP Paribas, ING, TD, UBS and UniCredit took the opportunity, launching the deal with guidance of the mid-swaps plus 10bp area.

“At that point we could have decided to shelve the trade and come back next week, or something like that, but the outlook was reasonably solid,” said Joynt. “The fortunate thing is that planting the flag on the Monday allowed for some investor dialogue, so we had a reasonable feel for what investors were thinking.

“We decided to go forward and were able to print a good trade, as it turned out.”

The deal was ultimately priced at 8bp and the size fixed at EUR1bn (C$1.51bn) with books over EUR1.3bn.

“It was maybe a couple of basis points wider than it would have been if we’d had the fortune to do the deal a couple of weeks earlier, but we were in blackout so that wasn’t an option,” said Joynt. “We were pleased to be able to take out a yard at what was very attractive levels compared to our global curve and various funding programmes.”

Following hot on the heels of the EUR1bn trade, and amid a period of sustained stability in the broader market, TD then on Thursday morning launched a sterling-denominated three year FRN via leads HSBC, Lloyds, NatWest and TD.

The £1bn (EUR1.14bn, C$1.72bn) deal was priced at 27bp over three month Libor, down from initial guidance of the 30bp area, with final demand of more than £1.2bn, including £25m joint lead manager interest.

It is the largest sterling-denominated covered bond from a non-UK issuer.

“We were hoping to get a good size out of it and we had faith in our name, but to get the largest non-domestic sterling covered bond printed, against that backdrop, exceeded our expectations,” said Joynt.

Prior to coming to the market this week, it had already been TD’s plan to launch both deals in quick succession, Joynt said.

Sameer Rehman, director, international fixed Income, origination and syndication at TD, noted that there was little crossover in demand between the two deals, enabling the issuer to print in size.

“We see the euro market and sterling market as two very distinctive buyer bases and pockets of cash, and therefore complementary when it comes to our ability to raise funds,” he said.

Joynt added that the issuer had targeted the two currencies after observing favourable movements in the basis, with the EUR1bn offering cheaper seven year funding than the issuer would have been able to secure in other markets, he said, and the £1bn three year flat to what TD could have achieved in US dollars and more attractive than any other options.

The two deals came after TD last Friday printed a C$2.25bn five year senior unsecured issue, and Joynt added that as TD’s funding needs are concentrated in the two to seven year part of the curve, it had hit most of its favoured maturities in the space of a week.

“It turned out very well, all things considered,” he said.

TD’s belief that other Canadian issuers were contemplating similar trades was vindicated today as Royal Bank of Canada today launched a three year sterling FRN (see separate article).