Canadian Imperial Bank of Commerce is set to issue the first benchmark covered bond of H2 2019 tomorrow (Wednesday), an eight year euro benchmark expected to offer a marginally positive yield, after Deutsche Hypo increased a June 2025 Pfandbrief by EUR250m at a negative yield yesterday.

CIBC’s planned transaction was announced this afternoon, with ABN Amro, BNP Paribas, CIBC, DZ and HSBC mandated, and is expected tomorrow.

The deal will be the Canadian issuer’s first euro benchmark since January 2018, when it sold a EUR1.25bn five year at 5bp through mid-swaps. According to pre-announcement comparables circulated by the leads, that January 2023 issue – CIBC’s longest outstanding euro benchmark – was quoted at 4bp over mid-swaps, mid, and its July 2022s at 3bp. Bank of Nova Scotia, National Bank of Canada and TD issues maturing in 2025 were quoted at 5bp over and a Royal Bank of Canada June 2026 at 7bp.

With the eight year swap rate at around minus 2bp today, the deal is expected to price in slightly positive territory.

Back in July 2016 CIBC became the first non-Eurozone issuer to sell a euro benchmark at a negative yield, when it priced a EUR1.25bn six year deal at minus 0.0771%.

Helaba last Wednesday issued the first negative-yielding euro benchmark since the end of CBPP3, a EUR750m five year mortgage Pfandbrief, and Deutsche Hypothekenbank yesterday (Monday) tapped a longer dated, EUR500m June 2025 mortgage Pfandbrief for EUR250m at a yield of minus 0.157%.

Leads Deutsche, DZ, HSBC, NordLB and UniCredit went out with guidance of the 1bp over mid-swaps area for the EUR250m no-grow tap, rated Aa1, and priced it flat to mid-swaps on the back of EUR275m of demand, excluding joint lead manager interest. According to a syndicate banker at one of the leads, the outstanding paper had been trading at minus 3.4bp, mid, implying a new issue premium of a few basis points.

Deutsche Hypo’s tap was the first benchmark business of the second half of the year, following six months in which issuance rose 9% year-on-year, according to Joost Beaumont, senior fixed income strategist at ABN Amro. Some EUR2.5bn of new issues in June took year-to-date supply to around EUR93bn for the first half.

“Issuance has been supported by larger redemptions as well as favourable market conditions,” said Beaumont. “Indeed, it is likely that this has induced banks to have brought forward funding programmes, especially given that some dark clouds remain on the horizon (e.g. Brexit, trade war, Italy discussions with European Commission).”