Royal Bank of Canada was today (Monday) able to price a €1.5bn seven year euro benchmark 2bp inside where compatriot Bank of Nova Scotia came last Tuesday, with the success of the new issue said to show the market to be receptive to non-Eurozone names, even if price sensitivity was in evidence.

RBC leads Credit Suisse, ING, LBBW, NatWest, RBC and SG went out with guidance of the mid-swaps plus 12bp area for a seven year euro benchmark. After around an hour and 30 minutes, books were reported as being over €1.75bn, and after around two hours and 20 minutes, guidance was revised to 7bp on the back of over €2.65bn of orders. The pricing was ultimately set at 7bp and the deal size at €1.5bn on the back of over €2.1bn of demand good at the final spread.

A syndicate banker away from the leads said the deal was the most impressive of the day given that RBC was able to price 2bp inside a €1.5bn seven year from compatriot Bank of Nova Scotia on Tuesday.

“Usually you have the Canadians pricing one on top of each other,” he said, “not necessarily with a difference in spread, but clearly this one achieved that, which is telling.”

Syndicate bankers at and away from the leads said the deal came roughly flat to fair value.

“They mirrored BNS in terms of size,” said a syndicate banker at one of the leads, “but came 2bp tighter, flat to the curve with no new issue concession – that’s a strong achievement.”

He saw fair value for the trade at around 7bp based on the issuer’s outstanding September 2025 and June 2026 paper trading at 4bp and 6bp, respectively, and BNS’s January 2027s and TD’s July 2027s at 7.5bp and 7bp, respectively.

“Having such a great name and maturity, you don’t have to overengineer to see where fair value is for this one,” he said.

“And Eurozone paper is still a bit tighter, so you get some extra pick-up.”

He added that although there was some pricing sensitivity in the book, the issuer had achieved its goals and demonstrated the market is still very receptive. Another lead syndicate banker said the peak orders of over €2.65bn was particularly impressive.

“We lost some of the book by the 5bp price move,” he said, “but we tried to be sensitive to investors who wanted some degree of certainty by going with the number, so I think many were appreciative there wasn’t another uncertain iteration.”

The lead banker said the issue was priced competitively against global alternatives, such as US dollars and sterling, showing that non-European issuers are benefiting from the strong European issuance environment.

“The Canadian names are obviously very well established in the European market,” he said, “and for covered bonds in particular, which was helpful in terms of the execution timetable.”

He noted that the Canadian name did not need a longer timeframe than core CBPP3-eligible names, and that investors appreciated being able to invest in securities without any interference from the ECB.