NBC followed in the footsteps BMO and RBC with a five year euro benchmark today (Thursday), but was able to price tighter than its compatriots in conjunction with a more modest, €1bn size, and bankers said the execution bodes well for ongoing Canadian and shorter dated issuance.

Today’s new issue for National Bank of Canada (NBC) was announced yesterday (Wednesday) shortly after Bank of Montreal had issued a €2.75bn five year that is the largest single-tranche euro benchmark since 2006, while Royal Bank of Canada on Tuesday sold a €2bn 5.25 year.

This morning, NBC leads BNP Paribas, Crédit Agricole, LBBW, NBC, NatWest and UBS opened books with initial price thoughts of the mid-swaps plus 10bp area for the January 2027 euro benchmark, expected ratings triple-A. After an hour and 25 minutes, they reported books above €1.5bn, excluding joint lead manager interest. After two hours and 50 minutes, they fixed the spread at mid-swaps plus 5bp on the back of books above €2bn, excluding JLM interest. The issue size was ultimately fixed at €1bn (C$1.42bn) on the back of a final book of €1.5bn, pre-reconciliation.

The re-offer spread of 5bp is 1bp inside that achieved by its compatriots.

“They’ll be delighted to have printed inside of the major banks RBC and BMO this week,” said a banker away from leads, “which is a very good outcome for them from a spread relativity perspective, as in the past, they have on occasions had to price at a slight discount to those types of names, even when they’ve been printing more modestly-sized transactions. So I think it’s a little bit of a reset from that perspective.

“It’s nice to see there still being continued appetite for the Canadian names,” he added, “and the depth of capacity in the market overall for five year covereds bodes well for the level of liquidity and demand for euro covereds in general right now.”

Despite being smaller than its compatriots’ issuance in the five year part of the curve, today’s deal is NBC’s largest benchmark covered bond since 2015. Its last €1bn benchmark was a January 2022 issue that matures next week.

Bankers put fair value at 3bp-4bp based on NBC’s, implying 1bp-2bp new issue concession, although a lead banker said a “maximum” 1bp NIP was paid and the banker away from the leads and others echoed this.

“I guess this is one of those times where the last primary deal will really be more of a reference than relatively illiquid secondary market for a name such as this,” said one.

A lead banker said that the heavy Canadian supply earlier in the week raised questions over the wisdom of a further five year, but that the strength of the preceding trades gave them the confidence to proceed. He acknowledged that some €500m of orders were lost upon the final pricing, but said the bonds were in firm hands.

“It was definitely a good trade for the issuer,” he added. “It was a very good window as fives are on fire at the moment. Everything is focused on this maturity.”

However, he said that the picture is different further along the curve.

“Sevens also work, 10s are not ideal, and I think 10-plus is very much closed at the moment,” said the lead banker. “We are talking with a few issuers who are looking more at the longer end, but for now, it is not reasonable or feasible to go, because there’s quite a big uncertainty in the market as to what will happen next.

“It’s right to just wait and see.”

Indeed, syndicate bankers expect issuance more broadly to ease off in the coming days, citing a degree of fatigue, investor sensitivity, and banks entering blackout periods.

“It’s probably not going to be zero supply,” said one. “But in a softer market, why would you rush out a trade if you can wait another week?”