Canadian issuers this week kept benchmark covered supply coming in sterling and US dollars in the run-up to the holiday season, with Royal Bank of Canada raising $1.25bn and Bank of Montreal £1bn of three year funding, as the euro market finally quietened.

On Monday, RBC leads Barclays, Lloyds and RBC priced the $1.25bn (€1.19bn, C$1.71bn) December 2025 issue at 85bp over SOFR mid-swaps, the middle of guidance, on the back of some $1.35bn of orders from more than 40 accounts.

The re-offer spread was flat to where Commonwealth Bank of Australia priced a $1.5bn three year covered bond a week earlier. According to a lead banker, that Australian deal had tightened to around 78bp, bid, while CCDJ October 2025s were seen at around 75bp.

“That would suggest fair value of 80bp or thereabouts, so a relatively standard concession of 5bp or so made sense from an IPTs and landing perspective, given the size of the order book,” he said, noting that there was some resistance to moving tighter than CBA’s re-offer.

“The $1.25bn size we got done was to the upside of the minimum $1bn target going into the trade,” he added, “and that additional liquidity was welcomed.”

The trade comes at the end of a busy year for covered bonds from the issuer and Canadian banks in general.

“The three year dollar covered represented the cheapest to deliver transaction that they hadn’t hit so recently,” said the lead banker, “so they were keen to do that, also given that it’s the first week of December: it’s a product that from a distribution perspective is reasonably lumpy, which means you can go into it with a number of lead orders and reverses in hand, so your execution risk is pretty modest – for other options, either the investor participation or the certainty around likely landing level were perhaps a little more volatile.”

RBC’s new issue comes after the bank on 29 November announced it had agreed to acquire fellow issuer HSBC Bank Canada from HSBC Holdings for some C$13.5bn. Moody’s on 1 December affirmed RBC’s ratings and put HSBC Canada’s ratings on review for upgrade – its Counterparty Risk Assessment is currently A2(cr) while RBC’s is Aa1(cr).

“If the sale goes through, we understand that RBC will also take over HSBC Bank Canada’s covered bond programme,” said DZ Bank analysts. “For investors, the takeover of the Canadian HSBC subsidiary, which has been up for sale for several months, by a bank with a strong credit profile is good news in our view.”

They noted that while the programme’s triple-A ratings from Moody’s and Fitch should not change, their resilience to any issuer downgrade should improve thanks to RBC’s stronger rating profile.

The lead banker said that the acquisition was not an issue raised by investors during the execution of this week’s dollar benchmark, and had earlier been well covered by RBC in a call ahead of its latest earnings.

Bank of Montreal (BMO) was also able to find an attractive window for its latest covered bond, printing a £1bn (€1.16bn, C$1.66bn) three year FRN at Sonia plus 65bp on Wednesday. A banker away from the leads said the funding level was roughly flat to what RBC achieved in dollars.

“It was a pretty good deal, to be honest,” he added. “Getting a £1.2bn order book at this point in December is a testament to the fact that the sterling market is pretty buoyant at present.

“It’s also a testament to the fact that you do get these seasonal cashflows in sterling, with the Gilt redemptions and maturities, which means investors are feeling pretty cash rich at present. And sterling certainly feels very investable again for a broader range of investors.”

Barclays reopened the sterling covered bond market on 9 November after a period of turbulence sparked by the brief premiership of Liz Truss, and BMO’s new issue this week was the first non-UK sterling covered bond since then.

The renewed Canadian supply comes after the banks’ latest earnings season, although covered bond issuance from the jurisdiction has eased relative to other waves over the past year.

“For the Canadian banks in general, all things being equal, they might rather look at doing senior unsecured, because the differential between senior and covereds has compressed,” said a syndicate banker. “And so whilst they all hit the covered bond markets globally pretty hard during the course of this year, doing rainy day trades during the rainy days, they’re more likely to do a little bit more in the way of seniors.”

No further euro benchmark issuance has emerged since a €750m three year debut covered bond from Credit Suisse on Thursday of last week (1 December), with supply having possibly finally come to an end after a bumper year. According to LBBW analysts, the latest a euro benchmark covered bond has been issued in the past decade was on today’s date (9 December) in 2015.