Evolving funding needs and a strategic commitment to the market contributed to Canadian Imperial Bank of Commerce successfully issuing its first euro benchmark in 18 months on Monday, a €1.25bn five year, according to Wojtek Niebrzydowski, vice president, treasury, at CIBC.

The new issue is CIBC’s first euro benchmark covered bond since a €1.5bn four year in March 2023. It followed that up with £750m and $1.75bn trades in April and June 2023, respectively, but has since been absent from benchmark covered bond issuance.

“The term funding activity is a function of the balance sheet dynamics,” Niebrzydowski told The CBR, “so if the asset growth is matched by what we view as stable deposits, then obviously that affects the extent of activity on the overall term funding side. Furthermore, we have been active throughout the year on the term funding side, but it was with either capital-related issuance – so Tier 2, AT1 – or bail-inable senior unsecured, contributing to the overall regulatory capital TLAC stack. So in the context of those activities, we did not have a pressing need for other types of funding, which would principally include covered bonds.

“There could be a slight change in that regard going forward,” he added. “There may be a need for funding outside of TLAC and capital instruments. At the same time, we are conscious that we have over the years made commitments to be present in certain key markets on a periodic basis, euro covered obviously been one of these.”

CIBC reported its third quarter results on 29 August and had September in mind for a euro benchmark, according to Niebrzydowski, ideally after ECBC events in Porto and concurrent investor meetings the week before last. Ultimately, it hit the market early on Monday, cognisant of the potential for competing supply.

“In the bigger markets, no one has the luxury of anticipating being the only trade on screen, so generally we don’t have a concern about going head to head with other issuers and have done so before,” said Niebrzydowski, “but to the extent you can find a window that’s less busy, that’s always better from an execution perspective.

“In the end the transaction worked out quite well,” he added, “so it proved to be a good choice of day.”

Leads CIBC, DZ, HSBC, Natixis and SG opened books at 8.24am CET with initial guidance of the mid-swaps plus 40bp area for the euro-benchmark sized October 2029 issue, expected ratings Aaa/AAA (Moody’s/Fitch). After around two hours and 20 minutes, demand was above €1.3bn, excluding joint lead manager interest, then after around four hours and 20 minutes, the spread was set at 35bp on the back of orders above €2bn, excluding JLM interest. Books closed around an hour later at a final size of around €1.8bn, including JLM interest, for a €1.25bn (C$1.9bn) deal size, with more than 70 accounts involved.

Syndicate bankers at the leads put the new issue premium at around 2bp, with a €1bn May 2029 Desjardins covered bond – the last five year euro benchmark from Canada – seen at 33bp, while a €2.5bn February 2029 from TD was at around 35bp, with the latter bank’s heavy issuance seen as contributing to it trading a couple of basis points wider. Bankers put the new issue premium at the lower end of the range of what issuers might expect in prevailing market conditions.

“What we have noted is that the market is somewhat softer than it was at the beginning of the year,” said Niebrzydowski. “Having said that, we were asked about our issuance plans in every single one of the meetings we had around the ECBC, so we were reasonably confident that, absent some unexpected market developments, there should be sufficient demand for us coming to the market – especially since, one, we’ve been absent for 18 months, and two, there hasn’t been a lot of Canadian supply, and the supply that we have had was a bit lopsided.”

Apart from €5.5bn and €4.25bn triple-tranche trades from TD in March and August, respectively, the only two Canadian benchmarks this year have been Desjardins’ five year and a €500m three year debut from Equitable.

“We have enjoyed bigger books over the years,” added Niebrzydowski, “but above €2bn before final guidance was still a decent outcome and it was fairly well distributed, with a few new names, and a number that have been supporting us for years.”

Banks and private banks were allocated 40% of the issue, central banks and official institutions 37%, asset managers and fund managers 20%, and insurance companies and pension funds 3%. Germany and Austria took 35%, France and the Benelux 24%, the UK and Ireland 18%, APAC 12%, Nordics 10%, and other Europe 1%.

Further benchmark covered bond issuance will depend on the factors cited by Niebrzydowski earlier.

“To the extent there are funding requirements and we don’t need to cover that exclusively by issuing bail-inable senior,” he said, “a logical consequence is that there could be some other covered bond transaction. But again, it’s a function of a few moving parts.

“It’s good to know we generally have access to a number of markets, and we are reasonably confident that that access will remain.”