HSBC Bank Canada is poised to launch the first US dollar benchmark in over a month tomorrow (Wednesday), a three year 144A/Reg S deal that is set to reopen the market at a much tighter level than when its compatriots came at 100bp over in March.

The last US dollar benchmark was a $1.25bn (€1.14bn, C$1.76bn) three year transaction from Toronto-Dominion Bank over five weeks ago, on 27 March, which attracted over $1.4bn of demand, more than a Bank of Nova Scotia $900m three year two days prior. Both were priced at 100bp over mid-swaps.

A syndicate banker at one of HSBC’s leads said that was an “eye-watering number”, but that spreads have improved markedly since then, which may have encouraged the issuer to approach the market. According to comparables circulated by the leads, TD’s and BNS’s 2023 paper has tightened some 40bp in the secondary market to trade around 60bp over, while the leads put HSBC Canada’s outstanding September 2022s at 59.5bp.

“They’ve definitely performed,” said another lead banker, “and we can certainly take a bit of comfort from this. I can’t see it having a triple-digit spread – that’s pretty much off the table as we’re in a pretty different market than we were a few weeks ago.”

The most recent euro benchmark supply from Canada was a BNS €1.25bn tap of a €750m March 2023 issue on 9 April that set a wide for the year at 55bp over mid-swaps. That has since tightened to trade around 35bp over, which the leads said is equivalent to around 64bp over in US dollars.

HSBC Canada’s new issue is set to be its third US dollar benchmark, following three year transactions in November 2018 and September 2019 that were sized at $750m and $1bn, respectively.

“They’re not the most frequent of issuers,” said one of the lead bankers, “and when you’re still introducing yourself to the covered bond market, a heads-up on supply is appreciated by the investor base, who may want to do some work on the pool and the credit.”

The mandate was announced this (Tuesday) morning and he added that the deal could be expected to be announced at the London open tomorrow, but that this was still to be confirmed pending market conditions.

CIBC, Danske, HSBC, LBBW, Natixis, Rabobank, RBC and Santander have the mandate.