RBC issued the biggest single-tranche benchmark covered bond in over five years yesterday (Tuesday), a US$2.5bn trade, amid Canadian banks’ ongoing global issuance spree, which today saw BNS in euros and BMO in sterling, with CIBC having added Australian dollars to the mix.

The only major Canadian issuer absent from the covered bond market was Toronto-Dominion, but a syndicate banker noted that it had tapped the senior unsecured market in dollars yesterday, meaning Canada’s five biggest issuers were all active in the wholesale markets yesterday in a variety of currencies, tenors and formats.

However, he said the level of activity was only natural.

“There’s a few jurisdictions where banks are having their central bank facilities either gradually or swiftly removed – Canada, Australia, the UK – so I think there is an expectation that for all of them, from here on in, you will see a little bit more in the way of normalised wholesale funding patterns,” he said. “Within that context, it’s a natural point in their calendar year for the Canadians to be financing in the wholesale markets – they all just reported results in the past couple of weeks – so it is logical that they are looking at wholesale financing. You wouldn’t really think of that as being wildly unusual if the big US banks were printing post their earnings, and it’s somewhat similar with the Canadian market, with the exception that they obviously have the benefit of also looking at covered for their lowest cost of financing.

“I think it’s clear that whilst they do want and have to meet their TLAC-related requirements in senior unsecured, there is also a focus on replacing what was pretty efficient central bank financing with the next-most efficient option in the wholesale market, which is obviously going to be the covered bond market, and therefore you are seeing a heightened level of activity relative to that which we have been used to.”

After Royal Bank of Canada leads RBC, Citi, Credit Suisse, HSBC, Standard Chartered and UBS yesterday morning European time went out with IPTs of the mid-swaps plus 20bp area for the September 2026 144A/Reg S dollar benchmark, rated triple-A, they fixed the pricing at 18bp and sized the deal at $2.5bn (€2.11bn, C$3.15bn) on the back of some $2.8bn of demand.

The last single-tranche benchmark covered bonds of a similar magnitude were in April 2016, a $2.5bn five year for Bank of Nova Scotia and a €2.25bn 15 year for ABN Amro. RBC’s deal is also only the second 144A US dollar benchmark of the year, following a US$2bn five year benchmark for CIBC in June. RBC’s last US dollar benchmark was a $1.5bn three year in September 2019.

It had already tapped euros and sterling this year – a €1.25bn 10 year benchmark in January and a £1.25bn five year FRN in July – and a syndicate banker at one of the leads said that, with supply expected in other currencies, US dollars was a sensible option.

“There was also a sense that, post-Labor Day (Monday), with overall supply in the month of August having been modest, and only one dollar covered so far this year in the US market, the technical picture in the market would be strong,” he said. “The saving of 20bp or so versus senior unsecured is also something the issuer viewed as making this covered bond an attractive wholesale funding option.

“We’re very pleased with the result,” he added. “$2.5bn is obviously a very good size and the pricing level of plus 18bp was a pretty compelling one relative to other covered markets, as well as senior unsecured levels in dollars.”

Bank of Nova Scotia (BNS, Scotiabank) yesterday announced plans for an eight year euro benchmark after issuing a £1.5bn March 2025 FRN, and this morning leads Commerzbank, Natixis, RBC, Scotiabank, Société Générale and UBS opened books for the September 2029 issue, rated triple-A, with initial guidance of the mid-swaps plus 11bp area. After about an hour, books above €1bn were reported, and after around two hours, the spread was fixed at 8bp on the back of more than €1.4bn of demand. The size was ultimately set at €1.5bn, with books in excess of €1.9bn, including €160m of joint lead manager interest.

A syndicate banker at one of the leads noted that Scotiabank felt comfortable with its “drive-by” announcement and execution in sterling yesterday after having only recently issued a £1.3bn five year FRN, in June, but was keen to tee up its first euro benchmark since April 2020 with an announcement the day ahead of launch.

“They seem pretty motivated around meeting their wholesale financial requirements for the quarter in a relatively short space of time,” he added. “They are weighing up a variety of markets, including sterling and euros, and clearly trying to navigate the traffic a little bit as well of other issuers.

“Their approach seems to have paid off well. The €1.9bn book we had in the end was pretty impressive, particularly in that tenor, as was the €1.5bn size for that part of the curve.”

He noted Scotiabank’s eight year maturity was slightly beyond the five to seven year maturity bracket most favoured by investors, but said the issuer was keen to maximise the efficiency of its covered bond funding.

The lead banker put fair value at around 7bp, implying “a basis point or so” of new issue premium – also noting the competitiveness of euros relative to other currencies – and a syndicate banker away from the leads saw it at 1bp-2bp.

“It was very well subscribed,” he said. “A bit slower than de Volksbank (see separate article), but in the grand scheme of things and in a busy market, it was a very good deal.”

Scotiabank’s €1.5bn trade is the biggest euro benchmark since the summer break.

Bank of Montreal (BMO) followed Scotiabank into the sterling market, today selling a five year inaugural Sonia-linked issue that it announced yesterday. Leads BMO, HSBC, NatWest and Santander opened books this morning with guidance of the Sonia plus 30bp area for the triple-A rated September 2026 sterling benchmark, which pays a Sonia plus 100bp coupon. After around three hours they set the spread at 28bp on the back of books in excess of £1.5bn, excluding joint lead manager interest, and the size was ultimately set at £1.5bn on the back of around £1.55bn of orders, including £15m of JLM interest.

A A$1.5bn (C$1.4bn, €940m) five year deal for CIBC Sydney yesterday makes Canadian Imperial Bank of Commerce the only issuer to have issued benchmark covered bonds in as many as four currencies this year, according to a syndicate banker at one of leads ANZ, CIBC, HSBC, NAB and Westpac. In April, the Canadian bank sold a €1bn eight year deal, and in June, a £1.25bn five year FRN and a US$2bn five year benchmark.

“We value diversification and want to maintain a periodic presence in various markets,” Wojtek Niebrzydowski, vice president, treasury, at CIBC, told The CBR.

The deal is the largest Australian dollar covered bond CIBC has issued since first entering that market in 2010.

Following an announcement on Monday Sydney time, the Australian dollar benchmark-sized transaction was launched yesterday morning with IPTs of the BBSW+40bp area, and ultimately the A$1.5bn size was priced at 37bp on the back of more than A$2bn of orders. The size and price make it the biggest and tightest five year benchmark for a foreign issuer in Australian dollars.

ING Australia launched the last previous Aussie dollar benchmark covered bond, a A$750m five year trade in mid-August, and Niebrzydowski said the more than A$2bn of orders for that deal boded well for its own new issue.

“There seemed to have been a fair amount of demand left on the table,” he said, “so it wasn’t necessarily a surprise that we ended up with our A$2bn-plus book.”

According to Niebrzydowski, the pricing was equivalent to US dollar Libor plus 22bp, the level at which it sold its five year US dollar issue in June, although it has since tightened, with RBC’s five year yesterday also pricing a few basis points tighter, at 18bp. He noted that the pricing was also 3bp-4bp wide of what might be achievable in euros but reiterated the diversification benefit of the Aussie dollar.

A syndicate banker said that there is “less than a handful” of basis points difference in the funding levels achieved by the Canadians in the different markets.

“At the margin you’d say that perhaps the sterling and euro markets are probably the most attractive from a comparable spread perspective, but the dollar market is still a very meaningful saving versus senior unsecured and the Aussie market is one that clearly provides nice diversification as well,” he said. “That helps in providing a more reasonable menu of options for issuers to make sure they are not crowding each other out of one particular currency market or tenor – so far, at least, there hasn’t been any evidence of indigestion or any one particular market being too actively targeted relative to others.

“That’s testament to the fact that the Canadian banks have been operating in a lot of international markets and have worked pretty hard to maintain those investor credit lines and availability for the time when they were going to be more active in the wholesale markets once again, and this is the fruit of that labour we are seeing.”

HSBC Bank Canada successfully debuted in euros yesterday with a €750m five year and today Equitable Bank launched its inaugural covered bond, a €350m three year (see separate article).