Canadian Imperial Bank of Commerce (CIBC) issued the biggest syndicated single-tranche covered bond since April 2020 yesterday (Tuesday), a $2bn five year Reg S/144A deal that attracted some $3.2bn of orders, exceeding the issuer’s expectations, according to CIBC’s Wojtek Niebrzydowski.

After a mandate announcement on Monday morning, leads CIBC, Citi, Credit Suisse and HSBC yesterday morning European time went out with initial price thoughts of the mid-swaps plus 25bp area for the July 2026 transaction, with expected Aaa/AAA ratings (Moody’s/Fitch). The deal was ultimately priced at 22bp and sized at $2bn (€1.68bn, C$2.47bn) on the back of some $3.2bn of demand.

“We went into the North American open with around $1.5bn in orders from Asia and Europe, which was pretty pleasing,” Niebrzydowski, vice president, treasury, at CIBC, told The CBR, “and ultimately between demand from North America and some additional demand from Europe, we ended up somewhere in the neighbourhood of $3.2bn, which was, I must say, above our expectations.”

The $2bn new issue is the largest syndicated covered bond since Crédit Agricole Home Loan SFH sold a €2bn ($2.38bn) long four year issue in April 2020, and the largest US dollar trade since a $2bn five year Westpac Banking Corporation deal in January 2019.

CIBC’s deal is the first dollar benchmark since February, when Aareal Bank sold a $750m four year Pfandbrief, and the first from a non-European issuer since Fédération des caisses Desjardins due Québec (CCDJ) issued a $750m three year. Niebrzydowski said the lack of supply was a reason for announcing the mandate on Monday.

“There is no outstanding benchmark of a comparable tenor that you can point to in secondary, so we needed some price discovery,” he said. “Accounts globally had the opportunity to look at the project ahead of launch, to refresh their credit work if they needed to do so, and, to the extent they were willing to do so, to provide feedback.”

This led to the IPTs of 25bp and re-offer of 22bp, which compared with a z-spread of 13bp for the Westpac January 2025s, 5bp for TD April 2023s, and 9bp for CCDJ October 2023s, according to comparables circulated by the leads. A syndicate banker away from the leads put the new issue premium at around 5bp.

Niebrzydowski estimated that the new issue came a couple of basis points wider than where CIBC might have issued a five year euro benchmark, but noted that the choice of dollars was strategic.

“For various reasons, we haven’t issued in dollars since June 2018,” he said, “which is not very typical for us – we normally try to maintain a presence in our various markets. We issued a euro in April and just did sterling, so – everything else being equal – dollars was an obvious choice.”

Niebrzydowski said the new covered bond met additional funding needs, as Canada’s recovery from the economic impact of the Covid-19 pandemic picks up, while CIBC is exceeding its TLAC requirements, and hence has no need to focus primarily on instruments contributing towards that.

CIBC’s sterling trade was a £1.25bn (C$2.14bn, €1.45bn) five year floating rate note on 16 June priced at Sonia plus 28bp on the back of over £1.5bn of demand. The deal came a day after Bank of Nova Scotia had issued a £1.3bn five year FRN at the same level.

The burst of issuance came amid scarce covered bond supply in sterling this year, with UK financial institutions mostly holding off, thanks to Bank of England funding.

“It’s a bit of a particular situation there,” said Niebrzydowski, “so we did expect a reasonable amount of demand. It was good to be able to get that, but we don’t anticipate this happening every time we go to sterling.”