Toronto-Dominion attracted EUR3.1bn of demand to a EUR1.75bn short five year euro benchmark on Wednesday at a level more than 10bp tighter than where its peers sold comparable trades in January, although almost EUR1bn of demand dropped out of the book as pricing was tightened.

Leads ING, LBBW, Lloyds, SG, TD and UBS opened books for the February 2024 euro benchmark at 9.00 CET with initial guidance of the mid-swaps plus 10bp area. About an hour later they reported books above EUR2bn, excluding joint lead manager interest, and then after a total of around two and a half hours revised guidance to the 6bp area on the back of a book above EUR4bn, excluding JLM interest, and containing more than 140 accounts. The pricing was ultimately set at 5bp over mid-swaps and the size at EUR1.75bn (C$2.61bn, US$1.96bn), with EUR3.1bn of demand from over 100 accounts good at re-offer.

The deal is the largest euro benchmark since Royal Bank of Canada issued a EUR1.75bn five year at 16bp over mid-swaps on 22 January on the back of some EUR2.75bn of orders. That came after three five year benchmarks totalling EUR3.25bn from Bank of Montreal, Bank of Nova Scotia and then National Bank of Canada, while Fédération des caisses Desjardins du Québec sold a EUR750m five year the day after RBC – these four Canadian trades all came at 18bp over.

A lead syndicate banker said that the leads put fair value for TD’s new issue at 4bp-5bp over mid-swaps, meaning the deal came with a negligible new issue premium. TD’s last euro benchmark was a EUR1bn seven year priced at 8bp over mid-swaps in May 2018 and this was quoted at an i-spread of 5bp, mid, according to pre-announcement comparables circulated by the leads, with a TD April 2024 deal quoted at the same level. Of the Canadian five year trades issued in January, RBC’s and Bank of Montreal’s were quoted at 5bp, and Scotiabank’s at 4bp.

With orders having peaked at around EUR4bn before falling to EUR3.1bn at re-offer, the lead banker acknowledged that there was some price sensitivity in the book. TD had also kept its options open regarding size and price when revising guidance to the 6bp area by not including +/-1bp “will price in range” language, as many recent issues have done, meaning that it could have priced the transaction as much as 6bp tighter than the middle of initial guidance and arguably inside fair value, at 4bp over mid-swaps. The lead banker said a range of options were considered, including a EUR1.5bn issue at 4bp – reflecting the increased price sensitivity at the tighter level – or a EUR2bn deal at 5bp, before the EUR1.75bn deal at 5bp was decided upon.

“We are very happy with how the trade developed,” he said.

The new euro benchmark is only one of three to have been launched in the first week of April after a quiet end to March, and the lead banker said the lack of supply combined with attractive market conditions and cash rich investors had made yesterday look like an opportune moment for TD to enter the market.

The issuer had been considering an intermediate maturity deal, he added, and the short five year, February 2024 maturity was chosen rather than anything longer than five years because the issuer already has its April 2024 outstanding and some investors, including some bank treasuries and official institutions, do not want to extend beyond five years. The leads were meanwhile confident that, after a back-up in rates, the short five year would not end up with a negative yield.

Germany and Austria were allocated 31% of the issue, the Nordics 17%, the UK and Ireland 14%, the Benelux 11%, France 9%, Switzerland 6%, Asia 3%, Italy 1%, and other 8%. Banks took 55%, central banks and official institutions 21%, fund managers 21%, and insurance companies and pension funds 3%.