Canadian Imperial Bank of Commerce (CIBC) attracted over £1bn of demand for its first Sonia-linked sterling benchmark today, a £500m three year FRN that satisfied “pent-up” demand for non-UK Sonia issuance and capitalised on a move in basis swaps in favour of sterling.

Leads CIBC, HSBC, NatWest and RBC went out this morning with initial price thoughts of the Sonia plus 52bp area for the benchmark-sized three year sterling FRN. After around one and a half hours, the book size was reported as being over £550m, and after around one hour and 50 minutes, the spread was revised to 48bp-50bp, will price in range, and the deal size set at £500m (C$852m, €581m) on the back of orders over £1bn. The deal was ultimately priced at plus 48bp, with £850m of orders good at re-offer.

A syndicate banker at one of the leads said CIBC had succeeded in relieving pent-up investor demand for Sonia issuance, as well as taking advantage of a movement in the basis swap in favour of sterling, which had put the issuer in a “really positive position”.

“Sterling has become a lot more attractive relative to a competing euro or dollar transaction,” he said, “because you’re basically pricing 1bp inside the bid side of the market in euros and 5bp tighter than where a new dollar would come right now.

“We haven’t had a significant amount of issuance in this space,” he added, “so people were really jumping for the opportunity to get involved in this type of name.”

The lead banker said that although it may have been possible for the issuer to take significantly more size, it had more than succeeded in achieving its aims.

“It’s a new inaugural sterling and they’ve been fairly focused in looking at the market,” he said, “and this outcome, pricing flat to fair value, is extremely constructive.”

A syndicate banker at another of the leads said the sterling trade had succeeded well in the wake of a less-than-conclusive emergency sitting of the UK’s parliament on Saturday.

“We elected to move this morning despite the difficult weekend on the political side,” he said, noting that CIBC also offered diversification away from UK risk.

“Announcing at the 52bp area,” he added, “we got a very good book and in about 90 minutes we were over £500m, then at plus £1bn we went to 48bp-50bp, fixed the size at £500m and ended up at 48bp, so a very strong trade.”

The lead bankers said the deal had priced flat to fair value, based on where October 2024 RBC paper issued last month was trading as well as three year paper from UK and international names, in a range of 44bp-48bp.

“Coming at 48bp with no new issue premium is a testament to the strength of the product,” said one. “It’s a great job by CIBC.”

A syndicate banker away from the leads saw fair value for the trade a tough tighter, at 47bp, citing 2022 TD paper at 46bp, but the ultimate pricing of 48bp was at the tight end of his expectations as to where the new issue would price.

He said he did not believe the prolonged Brexit stalemate continuing to dominate headlines would have swayed many investors away from CIBC’s trade.

“Sonia-linked covereds have held their own across the volatility of the past few months,” he said, “showing that Brexit has not had any real impact and that UK investors and bank treasuries are going to buy regardless.

“CIBC’s trade is triple-A rated and Canadian, so I don’t think Brexit makes a big difference,” he added, “and if Boris’s deal passes tomorrow or the day after, there’s not going to be a big impact on spread.”