Bank of Nova Scotia issued the first US dollar benchmark covered bond in over six weeks today (Wednesday), a $900m three year transaction that attracted orders just under $1bn of demand and took advantage of a turnaround in market sentiment in the past 48 hours.

The deal is the first US dollar benchmark since a $1bn three year for Nationwide Building Society on 5 February and the first since financial markets capitulated in the face of the growing Covid-19 pandemic.

Amid the wild swings in financial markets, US equities yesterday recorded their biggest percentage gain since the Great Depression alongside heavy issuance across fixed income asset classes, and BNS entered the market early this morning.

A syndicate banker away from the leads said the huge QE and stimulus measures being announced across both Europe and the US had given some semblance of a base for pricing, with a number of issuers moving to take advantage of the stable window. However, he noted that moves in either direction are still extremely vicious.

“As we’re seesawing through these outcomes,” he said, “issuers are trying to move quickly to seize whatever opportunities they can get, but also ensuring that pricing is suitably defensive in order to compensate investors for this almost compounded volatility they’ve faced in recent weeks.”

At the Asian open this (Wednesday) morning, leads BNS, Credit Suisse, JP Morgan and UBS went out with guidance of the mid-swaps plus 100bp are for a three year US dollar benchmark-sized transaction. At around 12:00 CET, books were reported as being over $790m, and the deal was ultimately priced at 100bp and sized at $900m (C$1.30bn, €833m), on the back of orders just under $1bn.

Syndicate bankers at BNS’s leads said its deal was a successful test of the dollar market, even if demand proved insufficient for it to reach the $1bn size the Canadian issuer might typically have been expected to print.

“Many questioned BNS earlier this month when it used the euro window before any other Canadian issuer did,” said one, “and in a way, it turned out to be one of the cleverest trades this year.”

Two weeks ago, on 11 March, BNS reopened the euro market at new, wider levels, pricing a €1.25bn five year on the back of over €1.4bn of demand.

The lead banker said today’s issue was not as successful as its predecessor, but nevertheless a decent result that also demonstrated Canadian issuers’ access to the dollar market.

“It was solid but not extraordinary,” he said. “This has nothing to do with the name, currency or tenor – it’s more of an indication of the rollercoaster market we are currently in – and will continue to be for next few weeks at least.”

The covered bond offered some 150bp of savings versus senior paper, according to another lead banker.

“The savings versus senior continues to be one of the big drivers,” he said.

A syndicate banker away from the leads said that although BNS priced some 73bp wider than Nationwide’s three year covered bond in early February, one has to look past such pricing comparisons in the “new world”.

“You almost have to look past pricing and ask whether it is an efficient use of collateral, whether they are able to get a benchmark-sized transaction complete, where it comes versus senior,” he said, “and in this case it was a reasonable outcome in unreasonable times.”

The pricing was some 20bp to 25bp wide of where an equivalent trade in euros might come, he estimated.