CIBC has followed up on the registration of a covered bond programme under Canada’s new legal framework by today (Wednesday) announcing a European roadshow, a move that could pave the way for an end to a multi-year hiatus of Canadian euro supply.

Canadian Imperial Bank of Commerce and Royal Bank of Canada last Thursday became the first banks to have covered bond programmes registered with Canada Mortgage & Housing Corp, which is administering Canada’s new covered bond legal framework.

CIBC today announced that it has mandated Commerzbank, HSBC and Royal Bank of Scotland to work with it on a European roadshow that will take place next week. A euro deal could follow.

A banker had said that CIBC would probably go on a roadshow before issuance off the new programme.

“The issuer is the same, the sovereign is the same, but there is a switch from 0% risk weighted insured collateral to uninsured, though still excellent quality, collateral,” he said, “which may necessitate reintroducing the programme to certain markets.”

Under the legislation that was introduced last year, Canadian covered bonds are not allowed to be backed by CMHC-insured mortgage collateral, which formed the basis of all issuers’ cover pools except for that of RBC.

With respect to the registration of RBC’s programme, David Power, vice president, corporate treasury at RBC, said that the key thing to note is that the issuer registered its existing programme.

“That’s important for people to understand,” he said.

The last Canadian euro covered bond benchmark was issued in September 2008, with the country’s issuers having since then concentrated on the US dollar market, where they have been able to obtain better funding levels.

CIBC has issued in euros, but does not have any benchmarks outstanding in the currency.

A syndicate official at one of the banks mandated by CIBC said that the euro market is “not a million miles away” from offering levels comparable with those in US dollars, and that the five to seven year maturity range would be where the issuer’s interest would lie for a deal.

“Canadian visitors to Europe are rare in any format, so you would expect decent interest,” he said.

Another syndicate banker said that having a legislative framework backing Canadian covered bonds is unlikely to have a material impact on pricing, with the main feature of Canadian supply being that it would offer euro investors “the perfect route to diversify their portfolios, just like the Australians”.

CIBC’s roadshow announcement comes on a day when the Province of Québec is selling a Eu1bn 10 year deal in its first visit to the euro market in four years, which some syndicate officials said could be of some use as a reference point.

“I hope that it could encourage Canadian issuers to look at the euro market,” said one. “It’s a good test.”

However, the issuer is rated single-A versus expected triple-A ratings for CIBC’s programme, and the syndicate official on the CIBC roadshow said that the Québec deal was “useful on jurisdiction, but not massively relevant on spread”.

The transaction is set to be priced at 37bp over mid-swaps, after guidance of the 40bp over area.