A five-and-a-half year covered bond for CIBC stayed the course in the face of renewed French political turmoil and rates volatility yesterday (Monday), as the Canadian bank raised €1.25bn (C$2bn) at a minimal new issue premium on the back of a peak €2.4bn of demand.

Leads CIBC, Crédit Agricole, DZ, Erste, Natixis and SG opened books with guidance of the mid-swaps plus 42bp area for the April 2031 euro benchmark, expected ratings Aaa/AAA (Moody’s/Fitch). After around an hour and 40 minutes, they reported books above €1.75bn, including €235m of JLM interest, and then after around three hours and 20 minutes they set the spread at 36bp on the back of some €2.4bn of orders. The deal was ultimately sized at €1.25bn, with the final order book above €2.1bn, including €175m of JLM interest.

In the latest bout of French political turmoil, prime minister Sébastien Lecornu resigned during bookbuilding for the deal, but a syndicate banker noted that the attrition upon final terms was very modest and much less than that suffered by a Commerzbank €500m five year last Thursday.

“Even though the French government crisis popped up again, there was no spillover. The volatility we were facing yesterday did not really disturb the transaction, which went according to plan, even surprisingly well.

“None of the investors said they were afraid, or tried to get an extra basis point as compensation,” added the lead banker. “There is so much cash around that investors want to put to work, and my gut feeling is that this French turmoil was priced in.”

A banker at another of the leads said a slightly larger than usual number of investors had added limits to their orders, while a few took a little longer to decide whether to stay in or not at the final terms.

“That was all a product of the volatility we had on the day,” he said, “but at the end of the day, the metrics didn’t really look any different from what they would have without the volatility.”

Lead bankers put the new issue premium at flat to 2bp, noting that as well as the secondary curve of CIBC, recent APAC supply, for example a strong Commonwealth Bank of Australia €1.25bn six year priced at 39bp on 29 September, were taken into consideration in such calculations.

The Canadian’s five-and-a-half year maturity was meanwhile chosen to differentiate it from CBA’s and other supply in the six year tenor, which was dubbed “the new five years”, as well as to better fit the issuer’s needs.

However, CIBC’s trade was bracketed with such APAC supply in its appeal to investors.

“In the covered bond market, spread is definitely key,” said the second lead banker, “and as long as you put on a little bit more spread, investors have a lot of cash to put to work, even if there is only like 12bp between a Canadian covered bond and a German Pfandbrief.”

Indeed, the first lead banker said that while fast money had not been so evident upon the post-summer primary market resumption, it was more in evidence today, as further testament to the strength of the market.