RBC seized upon a passing market window today (Tuesday) to price a €1bn five year covered bond in spite of a brutal equity sell-off yesterday, but did so at a spread twice that paid by compatriot BNS last Wednesday, while TD called off a three year sterling FRN citing intra-day volatility.

Royal Bank of Canada (RBC) leads Crédit Agricole, HSBC, ING, LBBW and RBC went out with guidance of the mid-swaps plus 40bp area for a five year euro benchmark-sized transaction at around 8am London time. After around an hour and 20 minutes they reported books above €700m, excluding joint lead manager interest, and after close to two hours the spread was set at 40bp on the back of around €1.1bn of demand, excluding JLMs. The deal was ultimately sized at €1bn (C$1.55bn), on the back of over €1.25bn of orders, excluding JLM interest.

RBC’s new issue is the first euro benchmark covered bond since Bank of Nova Scotia sold a €1.25bn five year at 20bp over mid-swaps last Wednesday, with equity markets having suffered dramatic falls in the interim on the back of the spread of the coronavirus and fears about its growing economic impact.

A syndicate banker away from the leads said the 40bp guidance for RBC’s new issue was appropriate and that the transaction represented a “solid” result.

“These are the prices that make sense right now and I think they did the right thing,” he said. “They would have loved to push through the 40bp, but even so, they’ve got a €1bn transaction away in this market with a book in excess of €1.25bn.”

Syndicate bankers at the leads said the deal could be considered a success in light of the circumstances, attracting a good number of accounts when many investors are reluctant to participate and others are experiencing operational difficulties as many of their staff transition to working from home.

“After the brutal sell-off in equities yesterday (Monday) and seeing the market turn in the course of this morning after what was an OK open,” said one, “being able to launch a €1bn deal against this backdrop with a fairly clean book of around 50 accounts is pretty good.”

Another lead banker said that in an exceptionally difficult market, the issuer was responsible in its decision to size the transaction at €1bn against a €1.25bn-plus final book.

“They haven’t oversized it and this should be applauded,” he said. “It’s a difficult market, and you have to pay what’s needed to get the trade done – and they did that.”

He said the issuer elected to move today given a slightly more stable market backdrop early this morning, and that during the execution it clearly communicated its strategy to investors.

“They didn’t leave anything to chance,” he said. “We gave an update of books over €700m, then an update of €1.1bn, set the spread, and then solved for size.

“There wasn’t much wiggle-room here – everyone had something very tangible to consider along the way.”

Toronto-Dominion Bank found the going too tough in the sterling market, electing to postpone its planned three year floating rate note.

After announcing the mandate this morning, leads Lloyds, Santander UK and TD went out with guidance of the Sonia plus 80bp area, but soon after midday, intra-day market volatility led to the issuer announcing the postponement.

A lead syndicate banker said the decision was made after the issuer took into account market volatility and significant falls in European equity indices between the open and midday, which resulted in pressure across a variety of asset classes, including Sonia-linked covered bonds.

“We saw secondary bonds trading anywhere from 8bp to 10bp back of yesterday’s close,” he said, “and the issuer, being a prudent and regular issuer in the market, wanted to do right by its investor base. So the decision was made to postpone the trade rather than push it through.”

Canadian Imperial Bank of Commerce nevertheless tapped for £125m (C$214m, €137m) an October 2022 FRN originally issued for £500m in October, with leads Barclays, CIBC, Credit Suisse and NatWest pricing the increase at Sonia plus 82bp, versus 48bp on the initial tranche.

Syndicate bankers contrasted the flurry of Canadian efforts with a lack of supply from European issuers following a new package of measures announced by the European Central Bank on Thursday.

“The revised ECB facilities have changed the calculus for many of them,” said one.

The last Eurozone issuance was almost two weeks ago, a €500m five year debut for Estonia’s Luminor bank on 4 March.