BMO issued the biggest post-financial crisis euro benchmark and largest Canadian euro benchmark today (Wednesday), a €2.75bn five year that drew over €3.5bn of demand, as investors piled into the attractive offering in the “flavour of the month” tenor, and NBC is due to follow in fives tomorrow.

According to a lead banker, the last single-tranche euro benchmark covered bond larger than the €2.75bn (C$3.91bn) Bank of Montreal (BMO) deal was a €3bn Cédulas Grupo Banco Popular 2 transaction in April 2006, while today’s trade is the largest ever Canadian euro benchmark.

“It was quite a success,” said a banker away from the leads. “Two and three quarter billion is the biggest truly alive covered bond for some time now, and it’s good to see such a rare breed.”

Another banker away from the leads said it reminded him of the olden days in covered bonds.

The mandate was announced yesterday (Tuesday), and this morning leads BMO, BNP Paribas, Commerzbank, Crédit Agricole, Santander and UBS went out with initial guidance of the mid-swaps plus 10bp area for the five year euro benchmark. The book topped €2bn after around 45 minutes, and the spread was later set at 6bp, “the number” – implying a new issue premium of 2bp, according to a lead banker. The deal was ultimately sized at €2.75bn and the final order book was over €3.5bn, marginally down from a peak book above €3.6bn.

BMO’s issue comes after compatriot Royal Bank of Canada yesterday (Tuesday) issued a €2bn 5.25 year at the same re-offer spread, and following the same initial guidance, on the back of some €3.35bn of orders.

A banker away from the leads said the opportunity for investors to gain exposure to a triple-A covered bond from a strong name offering a pick-up over Eurozone issuers was a factor in their success.

“It’s a copy paste of the RBC trade from yesterday,” he added. “But they obviously took it to the next level, by taking even more size.

“Clearly, you could see this as cheap, and the five year tenor is the strongest point on the curve. So in that respect, it’s not a surprise that they got a huge book, and they could have easily shaved off a basis point or two.”

The lead banker said that with BMO being a less frequent and hence scarcer name than RBC in euro covered bonds, the issuer and leads anticipated from the outset that a big size might be possible, or else pricing slightly inside RBC.

He said that five years remains “flavour of the month – or year”, with central banks and official institutions keen on the positive yields now available in the tenor and asset managers happy to park cash in that part of the curve given the macroeconomic backdrop, supplemented by LCR buyers.

“It is definitely one of the most defensive tenors,” he added. “When we had over €2bn of orders after 45 minutes, we started to realise there was a pretty chunky trade on the table. There were then two options: pushing in to 5bp for a smaller trade, which would have disappointed some quality accounts; or printing something really big.

“And when we announced the plus 6bp spread, the book kept on growing, meaning we had the ability to print a record trade, given that the issuer was willing to issue in size.”

National Bank of Canada is set to make it three Canadian euro benchmarks in the five year part of the curve in three days, having mandated BNP Paribas, Crédit Agricole, LBBW, NBC, NatWest and UBS to lead a five year euro benchmark that is expected tomorrow (Thursday) following a mandate announcement today.