Sole-led by BMO Capital Markets, the three year fixed rate transaction was initially issued on Thursday for $550m, before being increased on Monday by $50m to $600m (€552m).

“Producing such a dollar issue so late in the year is not that obvious,” said pbb’s Michl, “and the market for covereds has not been easy, especially in euros. It was also a bit tricky to find a consensus on pricing among several leads.

“But we had the sense that there would be investor demand and BMO was prepared to lead the deal, so we took the bold decision to proceed, and it worked out perfectly.”

The new issue was priced at SOFR mid-swaps plus 100bp. Pbb’s last dollar benchmark was a $750m three year issue in February 2022, priced at 43bp, although the most recent dollar benchmark was a $1.75bn five year for National Australia Bank on 20 November at 98bp and the last three year a $1.5bn issue for Nationwide Building Society on 6 November at 75bp.

“It’s not as cheap as previously – no question,” said Michl, “but that is a reflection of what has happened over the last year in the euro market. In comparison to euros, it’s not much more expensive, maybe 10bp, 15bp more – and at the end of the year, a euro benchmark would not have been on the table, anyway.

“We are happy to have the currency, which is important for the dollar asset in the cover pool,” he added. “And the investors are more non-German, non-euro accounts, which is also an advantage of having a Canadian lead manager who is selling the product into pockets other than the usual euro Pfandbrief buyers.”

Michl said the additional $50m placed on Monday – ahead of the settlement date – reflected some investors not having been ready for the intraday execution.

The new dollar issue comes after pbb’s last euro benchmark, a €500m long four year on 18 September, proved challenging, being priced in the middle of guidance, at 27bp with a new issue premium of around 10bp, and with order books undisclosed. That followed a €500m long three year in early July that was more than twice subscribed at a similar NIP.

“Currently, it’s difficult to predict which deals will be successful and which won’t,” said Michl. “Our benchmark at the beginning of June went really well after some difficult transactions in May.

“Investor appetite and market sentiment is changing quickly. In many cases there were no technical mistakes like wrong maturity or pricing.”

Pbb’s name has nevertheless been in focus against a backdrop of negative commercial real estate headlines. S&P cut its issuer credit rating from BBB+ to BBB on 17 November after pbb announced higher provisions, with the rating agency having previously allowed the lender a one notch uplift over its peers on the back of lower provisioning. S&P does not rate pbb’s Pfandbriefe, which are rated Aa1 by Moody’s.

“The developments in the commercial real estate markets are a topic that we can’t avoid,” said Michl. “But we have focused on low leverage lending with average LTVs of approximately 50%, which lead to a pretty low LTV in the cover pool of approximately 30% and – with the comparably short maturity of the loans – to a very low market risk score.”

The dollar Pfandbrief is pre-funding for pbb’s 2024 funding programme and attention will now turn to the euro market in the first quarter. The primary market is widely expected to be busy, although Michl noted that various of its German peers have recently tapped the market, potentially relieving first quarter supply pressures for Pfandbriefe.

“There are two options,” he said. “Either you are there quite quickly, issuing in early January, or you rather wait – we have a late blackout period so can normally issue until the middle of February.

“Let’s see how the market opens and whether there’s a window.”

The deal was announced into Asia at around 11am Hong Kong time with initial price thoughts of the mid-swaps plus 97bp area for the May 2028 Australian covered bond, expected rating Aaa. By New York open, demand totalled some $2bn, according to a banker at one of the leads.

“That put us in a position of strength,” he said, “and we moved to 95bp given this momentum.”

Anchor orders were complemented by granular demand, he added, and the book peaked at around $3bn. The $1.75bn (€1.62bn, A$2.63bn) deal was ultimately priced at 92bp.

“It went super-well,” said a lead syndicate banker. “It’s probably as good a dollar covered bond as I’ve worked on in 10 years or so in terms of the breadth of investor audience and number of accounts involved, everything from central banks and bank treasuries through Asia and Europe and also some reasonable US involvement.”

The UK and Ireland were allocated 36% of the paper, Asia 30%, the Americas 20%, EMEA 9% and Australia 3%. Banks and financial institutions took 59%, central banks and official institutions 30%, and asset managers and insurers 11%.

HSBC, Lloyds, RBC, TD and Westpac were active bookrunners, and DBS a passive bookrunner.

The lack of recent dollar supply contributed to the relatively large 5bp move from IPTs to final pricing, according to the lead bankers.

“There was a reasonable amount of price discovery through the process,” said the syndicate banker, “hence, why we moved from 97bp to 92bp, which is quite a lot for a covered bond from a mainstay jurisdiction, but reflective of the fact that secondary instruments are quite stale, while this this was an opportunity to buy this asset class in some size.

“That did leads to a bit of a re-racking of prices.”

The leads said the final pricing was appropriate, noting that a smaller deal might have been possible at an even tighter spread. The $1.75bn size was meanwhile the top end of what Westpac had been seeking.

They put the pricing roughly flat to euros, noting that euros’ pricing advantage had eased this year, with both the ECB’s winding down of CBPP3 and a move in cross-currency basis swaps in favour of dollars contributing to this.

“There’s been an interesting sort of shifting of tectonic plates in this regard,” said the syndicate banker. “There’s a range of opinions around just where a five year Aussie would price in euros, but Westpac didn’t pay up relative to euros.

“So dollars is once again an appealing choice relative to other markets, and for those issuers who want to diversify and retain a strategic foothold in the dollar market, that’s helpful – as well as to alleviate some supply pressure from the euro market.”

Further supply could be forthcoming after Westpac’s success, suggested bankers, particularly with Canadian banks coming out of blackouts next week.

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.

The new Canadian issues are the first new benchmark covered bonds since Argenta Spaarbank sold a €500m seven year last Wednesday (23 February), with the escalation of Russia’s invasion of Ukraine heightening financial market volatility in the interim. However, today’s covered bond supply came after a resumption of primary market activity from SSAs in euros and sterling over the past two days and also FIG issuance in the dollar market.

“It’s good to see covered bonds coming out,” said a banker.

Bank of Montreal (BMO) leads Barclays, BMO, Credit Suisse, Lloyds, NatWest and Nomura went out with initial guidance of the Sonia plus 42bp area for its March 2027 sterling benchmark, expected ratings triple-A. A £600m (€719m, C$1.02bn) deal was ultimately priced at Sonia plus 40bp on the back of some £630m of demand.

The pricing compares to 28bp for a Bank of Nova Scotia £1.3bn four year FRN on 17 January and 28bp for a Clydesdale Bank £600m five year floater on 8 February, the last two benchmark sterling covered bonds. The deal is also the smallest sterling benchmark from a Canadian issuer since October 2019.

A syndicate banker away from the leads said that BMO had, however, been able to price the new issue arguably flat to fair value, based on the bid side of where comparables were trading.

Bank of Nova Scotia (BNS, Scotiabank) opened books for its five year dollar benchmark with initial price thoughts of SOFR mid-swaps plus the 60bp area. The final terms had not been set as The CBR was going to press.

The last five year dollar benchmark was a $2.5bn five year for CIBC priced at 48bp on 11 January.

A banker away from the leads put fair value for Scotiabank’s trade at 57bp.

“So the new issue concessions on both transactions will have been pretty modest,” he added, “and certainly relative to what you would see in senior unsecured at the moment.”

The Canadians hit the market today after announcing their latest results yesterday (Tuesday) and a syndicate banker said it was natural for the two to approach the wholesale funding markets at such a point in their financial calendars, irrespective of prevailing market conditions.

“For me, it underscores the value of the covered option for the universal banks in a time of volatility and uncertainty,” he added. “It’s no great surprise to see the likes of the Canadians avail themselves of the opportunity, given the 50bp-plus saving this financing will achieve for them relative to the senior unsecured alternative in the same tenor.

“And the ability of a couple of deals in different currencies to co-exist is a good statement about the level of demand investors have for the underlying credits, which are performing well – there is certainly less volatility in that part of the world than we are probably feeling in Europe right now.”

He noted that BMO and BNS issued euro benchmarks in January, making their visits to the other major currencies a natural step, rather than implying anything negative about the state of the euro market.

A syndicate banker in Frankfurt, meanwhile, said the Canadians’ reopening of sterling and dollars did not necessarily mean the euro market would be open for business.

“But more generally, why not?” he added. “We saw SSAs ranging from long fives to seven years today. None were particularly cheap in terms of fair value considerations, but they went decently to very well, so it seems the market for top rated paper in euros is open.

“So there are options. The only question is, who feels like testing the bathwater?”

Austria’s Hypo Noe and Italy’s Banco BPM announced mandates on the day the last euro benchmark was launched, Argenta’s last Wednesday, but syndicate bankers said they expect a larger and more established issuer to reopen the euro market.

“I wouldn’t expect them to show up this week,” said one. “They’d be well advised to wait for one of the bigger guys to restart the show.

“As far as the Canadians are concerned,” he added, “if they are doing sterling and dollars, it shouldn’t be ruled out that they are looking at the biggest covered bond market as well.”

Leads Citi, Credit Suisse, Goldman Sachs, NatWest and Nomura priced the issue at 43bp over following initial guidance of the 45bp area.

A syndicate banker at one of pbb’s leads described the transaction as conservative, but contrasted the situation in the dollar market with euros – where issuers today found conditions tough – and noted that the German issuer has typically issued in the three year part of the curve when visiting the dollar market.

“Net-net, it was a pretty successful deal,” he said. “The book isn’t the biggest pbb has had in dollars, but it’s still very nice to be approaching $1bn and $750m was the maximum they could do given their pool and refinancing need.”

The transaction comes ahead of the redemption on 31 May of a $600m three year deal issued in May 2019.

“We were able to tighten a couple of basis points and land flat to fair value or maximum 1bp back of it,” added the lead banker.

He said fair value was hard to assess, but noted that the most recent dollar benchmark covered bond, a $2.5bn five year for CIBC issued on 11 January, was trading at 48bp-50bp and, with the curve between three and five years worth around 10bp and pbb typically trading up to 5bp back of such a name, fair value was around the ultimate re-offer level.

“It was relatively attractive pricing to euros,” added the lead banker, “just a couple back – we don’t usually get these deals done through euros, given it’s a CBPP3-eligible issuer.

“We’re very pleased with the result.”

The deal is the first dollar benchmark covered bond from a European issuer to be priced off SOFR mid-swaps – a practice begun by Westpac in November – and the lead banker said this continued pbb’s opportunistic and innovative behaviour – citing, for example, the German in September 2020 being the first non-UK European issuer to sell a Sonia-linked benchmark.

“They continue on the path of issuing in a diversified currency range,” he added, “and being able to use the new benchmarks to access those markets.”

The dollar benchmark is the first since Westpac issued a $1.75bn September 2026 deal at 45bp over SOFR mid-swaps in mid-November, with covered bonds having been absent from the dollar market in the opening week of the year as the euro and sterling markets reopened.

Niebrzydowski, vice president, treasury, at CIBC, said the relative levels of activity was a consideration when the issuer was eyeing the market in the new year.

“Euros were a possibility as well,” he said, “but dollars tend to be somewhat less crowded. Plus, there was a longer interval since we last issued dollars.”

CIBC last tapped the euro market at the end of September, with a €1bn five year, followed by two €250m taps, while its last dollar benchmark was a $2bn five year in June 2021.

Although the overall dollar market enjoyed a bumper full week of issuance last week – while Europe faced a holiday-interrupted first week of the year – the market was quieter this Tuesday, with only two other bank trades hitting the market on Tuesday New York time after the Canadian bank announced its deal Tuesday morning London time. Meanwhile, euros was experiencing its busiest covered bond day yet, with four tranches totalling €3.5bn.

Leads Bank of America, CIBC, HSBC, TD and UBS opening books on CIBC’s trade with initial price thoughts of SOFR mid-swaps plus the 50bp area for the January 2027 dollar benchmark, expected ratings triple-A. After setting the spread at mid-swaps plus 48bp, the deal was sized at $2.5bn (€2.19bn, C$3.13bn) around lunchtime New York time on Tuesday, the deal was priced and free to trade at 8am London time on Wednesday.

“This was a brilliant trade,” said a banker at one of the leads. “We announced London time to get the interest out of Asia and Europe for the global distribution and also to go into the US in a position of strength, and that panned out pretty well. We then went from SOFR mid-swaps of 50bp to 48bp the number in one step just to give the market direction, and the book held together incredibly well, demonstrating the strength of the trade, and they were able to take $2.5bn.

“We saw the new issue premium as 1bp, which is an outstanding result combined with the size.”

He saw Westpac’s September 2026s at Treasuries plus 26bp, equivalent to SOFR plus 45bp, and Bank of Nova Scotia October 2026s at Treasuries plus 29bp, equivalent to SOFR plus 46bp, with the curve out to January 2027 bringing fair value for CIBC to SOFR plus 47bp.

“We could have priced it maybe a bit tighter,” said Niebrzydowski, “but we like to show a friendly face to the investors and try not to pick up the last penny from the trade. So 48bp was the logical choice, given where we started and the size of their book and the known sensitivities in it.”

The $2.5bn issue comes after a series of jumbo dollar covered bond benchmarks since mid-2021, including CIBC’s $2bn fives and a C$3.5bn five year from Bank of Nova Scotia in October that is the largest ever single-tranche benchmark dollar covered bond.

“Dollars are probably a bit more difficult to predict than euros in terms of issuance size,” said Niebrzydowski. “We were reasonably confident that it would be well above $1bn, given what we saw last year, but it would have been a bit too optimistic to foresee that it would be a $3bn book and a $2.5bn trade.”

North America was allocated 56%, EMEA 35% and Asia 9%. Banks took 64%, central banks and official institutions 22%, asset managers 12%, and insurance companies 2%.

The deal is only the second benchmark covered bond, after Westpac’s, to be priced over SOFR mid-swaps.

“This is where IBOR reform is going,” said Niebrzydowski. “We discussed this internally and with the syndicate, and we thought we should continue with the new approach, rather than going back to something that’s ultimately likely to be discontinued.”

CIBC’s last benchmark covered bond was a £1bn four year Sonia-linked deal on 7 December and the issuer also tapped Australian dollars last year.

“The success of the new issue is testament to CIBC’s global following as well as their sensible and methodical approach to global markets,” said the lead banker.

Niebrzydowski said investors can expect to see CIBC active in other currencies in the coming months.

“In terms of funding, we look at all the currencies in all debt classes, but covereds are the cheapest option most of the time, if not all the time,” he said. “I can’t disclose what’s next and when, but we’ll likely be there.

“And we are really looking forward to hopefully being able this year to do some investor and conference work in person,” added Niebrzydowski. “Let’s keep our fingers crossed.”

Following a mandate announcement yesterday (Monday), leads Barclays, BNP Paribas, NatWest and UBS this morning opened books with initial guidance of the Sonia plus 30bp area for Yorkshire’s £500m (€599m) no-grow five year Sonia-linked benchmark, expected ratings triple-A. After reporting books above £1bn, the leads set the margin at Sonia plus 27bp, with the final order book some £1.1bn.

The five year sterling covered bond is the first from a UK financial institution since January 2020, and comes after only two sterling covered bonds since February 2020 – £1bn 10 year Nationwide and £500m seven year TSB floaters in February and June 2021, respectively – and a lead syndicate banker said the deal had benefited from the lack of supply.

“It went really well,” he said. It’s consistent with what we’ve been seeing in the covered bond market in sterling and euros – there’s a lot of cash in the system at the start of the year.

“And there hasn’t been really any UK supply, particularly in this part of the curve, for a long time, so there’s a lot of pent-up demand for UK paper in sterling.”

The covered bond is the first in a sustainable format in sterling from a UK financial institution, and the lead banker said the social nature of the issue helped on the margin.

“The covered bond investor base is the same,” he said, “but it helped with some of the order sizes, just given that investors have a natural preference for ESG-linked instruments.”

Given the lack of UK supply in sterling, he said calculating fair value was not straightforward, but put it in the context of 26bp, implying a new issue premium of around 1bp, given that National Australia Bank priced at £1.5bn four year deal at 27bp in the only other sterling trade so far this year last Thursday.

“This is a year longer, and generally speaking, investors value UK collateral more because of its Bank of England eligibility,” he added, “so you would put fair value 1bp or 2bp inside the Australians.”

A syndicate banker away from the leads saw the outcome as a solid result.

“Decent execution at a decent level,” he said, “and good to see a UK name back in the market.”

He added that the new issue had also repriced the market, coming inside February 2027 Santander UK paper issued as a £1bn seven year trade in February 2020.

The banker nevertheless said he had been expecting an even stronger reception and slightly tighter pricing. He suggested that heavy triple-A sterling supply had moderated the outcome, as well as Yorkshire’s deal coming on the same day that a corporate social bond was competing for attention in the sterling market, with Motability issuing a £500m 20 year fixed rate bond.

“Maybe investors feel a little bit spoilt for choice right now,” he said.

UK issuers are expected to be more active in sterling this year, the syndicate banker noted, and he said Canadian Imperial Bank of Commerce (CIBC) approaching the dollar market today was in a similar vein.

“One of the themes for 2022 is the re-emergence of business as usual when it comes to wholesale financing for a variety of jurisdictions where their central bank emergency measures have now been withdrawn,” he said.

“CIBC’s deal further demonstrates that whilst the Canadians have quite a lot to do, they do have a lot of options,” he added.

Leads Bank of America, CIBC, HSBC, TD and UBS went out this morning with initial price thoughts of SOFR mid-swaps plus the 50bp area for CIBC’s five year 144A/Reg S US dollar benchmark. The deal was sized at $2.5bn and priced at plus 48bp as The CBR was going to press.

The last benchmark dollar covered bond was a $1.75bn (€1.54bn, C$2.22bn) five year for Westpac in November, which was the first to be priced with reference to SOFR mid-swaps. CIBC was last in the dollar market in June 2021, with a $2bn five year benchmark.

After a mandate announcement yesterday (Monday), NIBC leads Commerzbank, DekaBank, DZ, ING and NatWest opened books this morning with initial guidance of the mid-swaps plus 13bp area for the €500m no-grow November 2030 conditional pass-through (CPT) issue, expected ratings triple-A. After an hour and 45 minutes, they reported books above €850m, including €45m in joint lead manager interest. After two hours and 35 minutes, guidance was revised to 10bp+/-1bp, will price in range, on the back of books above €1bn. With orders still above €1bn at the revised guidance, the spread was ultimately fixed at 9bp. The final order book was €940m, including unchanged JLM interest.

The benchmark covered bond is NIBC’s first since it recently emerged that the Dutch bank is considering establishing a soft bullet covered bond programme, while peers NN, Achmea and Aegon have only issued soft bullet benchmarks rather than conditional pass-throughs (CPTs) since similarly establishing new programmes in the past 18 months.

“Conditional pass-throughs are always a bit tricky, as not every investor likes it, and it has become a bit of a rare breed,” said a syndicate banker at one of the leads. “But we had all the guys involved that we expected should play a role ahead of the transaction. There was of course some spread sensitivity, but it’s a very decent level of oversubscription.”

“And it’s not bought by the Eurosystem,” he added, “so there’s no political shading in a CPT orderbook, which probably makes it even better than the numbers alone suggest.”

Another lead banker said NIBC’s deal stood out in a weak market.

“If you look at the other deals today, away from covered bonds, they have struggled a bit to get the book together and they have paid a bit of a new issue premium,” he said. “We had around a billion in the book and decent pricing at plus 9bp, which is about 0.5bp NIP.

“We did a deal for NIBC earlier in the year as well, when we had a bigger book, but I think that’s a bit of a reflection of broader sentiments,” he added.

NIBC’s €500m 10 year CPT in April attracted a peak €1.75bn and final €1.35bn of demand.

The lead bankers put fair value for the new issue at around 8.5bp. According to pre-announcement comparables circulated by the leads, NIBC January 2028s, September 2028s and April 2031s were quoted at mid-swaps plus 8bp, mid, while its October 2029s were at 8.5bp.

Danske Mortgage Bank plc (Finland) is planning a €500m no-grow five year covered bond, which is expected to hit the market tomorrow (Wednesday), following a mandate announcement today. BNP Paribas, Danske, DZ, Erste and ING have been mandated as leads.

The new issue will be the Finnish arm of Danske’s first since January 2020, when it issued a €1bn eight year.

Westpac priced a $1.75bn (€1.53bn, A$2.38bn) five year 144A/Reg S trade at 45bp over SOFR mid-swaps yesterday, in the first benchmark covered bond to be priced with respect to the new US dollar reference rate.

The deal was priced at 45bp following guidance of the 46bp area. A banker away from the leads said the SOFR re-offer spread was equivalent to 22bp over Libor mid-swaps.

Canadian five year benchmarks issued in September and October were priced at 17bp-18bp over Libor mid-swaps, and the banker said that, with Aussies typically trading 2bp-3bp wider than Canadians in US dollars, he would have expected the pricing to be 1bp-2bp tighter.

Westpac’s pricing versus SOFR mid-swaps comes after issuers in other sectors, such as SSAs, have already tested the market with the new pricing reference, and the banker suggested the dollar market was well advanced in progressing towards the new rate, but that – unlike in the UK with respect to Sonia – not every investor might yet be as prepared as issuers would prefer.

“The $1.75bn size tells you it’s a good outcome,” he said, “but maybe they didn’t have the critical mass needed to tighten.”

Westpac Banking Corporation’s new issue is its first benchmark covered bond in US dollars since a $1.75bn (€1.53bn, A$2.39bn) five year launched in January 2020, and the first dollar supply since 7 October, when Deutsche Pfandbriefbank and Fédération des caisses Desjardins du Québec issued $750m three year Reg S and $750m 144A/Reg S benchmarks, respectively.

The deal has been marketed at a spread of SOFR mid-swaps plus 46bp, and is the first covered bond to be priced with reference to the new rate, although it has been used in other dollar sectors, such as SSAs.

The new issue had not been priced by the time The CBR went to press.

NIBC is expected to hit the market tomorrow (Tuesday) with a €500m no-grow nine year conditional pass-through (CPT) covered bond via Commerzbank, DekaBank, DZ, ING and NatWest.

The mandate announcement today comes shortly after it emerged that the Dutch issuer is considering following its peers in establishing a soft bullet covered bond programme. A syndicate banker at one of the leads said the issuer has noted that the soft bullet programme increases its options and that “it is definitely not shelving altogether” its CPT programme.

According to pre-announcement comparables circulated by the leads, NIBC January 2028s, September 2028s and April 2031s were quoted at mid-swaps plus 8bp, mid, while its October 2029s were at 8.5bp, with the lead banker putting fair value at 8bp-9bp, “depending on how you twist the curve”.

The last Dutch euro benchmark was a €500m 15 year soft bullet debut from Achmea on 22 September, which was re-offered at 8bp and today trading at 6bp-6.5bp, mid, according to a banker at one of its leads.

Berlin Hyp attracted over €1.25bn of demand to a €250m no-grow tap of its 0.01% August 2026 mortgage Pfandbrief today, with syndicate bankers seeing the strong demand for the shorter dated paper as indicative of investor defensiveness amid rates volatility.

Leads Commerzbank, DekaBank, HSBC, UBS and UniCredit went out with the tap this morning, setting the spread at mid-swaps minus 4bp at the outset. After around 35 minutes, they reported books above €500m, including €85m of joint lead manager interest, with the books set to close 20 minutes later. The final book was above €1.25bn, including €85m of JLM interest.

“This is another clear indication that interest is there,” said a banker away from the leads, “especially at the short end of the curve.”

Another banker agreed that such defensive trades were finding favour among investors, noting that a €1.5bn 15 year social bond for Dutch agency BNG had gone less well than expected today. He also contrasted the Berlin Hyp tap with a €250m tap of a €500m October 2031 MünchenerHyp Pfandbrief on Wednesday that was priced in the middle of plus 2bp+/-1bp guidance and not oversubscribed.

“There are definitely issuers who want to do deals,” he added, “but the long end moves have kind of spooked people a bit.”

Following a mandate announcement yesterday (Wednesday), Deutsche Pfandbriefbank (pbb) leads Citi, Credit Suisse, HSBC and Nomura this morning European time went out with initial guidance of the mid-swaps plus 22bp area for the October 2024 Reg S dollar benchmark mortgage Pfandbrief, expected rating Aa1. After close to three and a half hours, the spread was set at 20bp on the back of books above $600m, excluding joint lead manager interest, and the deal was sized at $750m (€649m) on the back of books in excess of $900m, excluding JLM interest, with orders ultimately exceeding $1.1bn.

The new issue comes ahead of a $600m redemption of a previous three year that pbb issued in November 2018 and a syndicate banker at one of the leads said the German had chosen to hit the market in advance of the maturity to take advantage of attractive conditions.

“The market looks pretty good, dollar deals are working very well, and crucially for them the basis swap actually made quite a bit of sense,” he said.

The funding level was equivalent to the mid-single-digits back of pbb’s euro curve, which was “palatable” to the issuer, according to the lead banker, while the issuer’s January 2021 dollar paper was quoted at 17bp, mid, implying fair value in the high teens.

“So a pretty minimal concession for the size,” he added.

The dollar benchmark is pbb’s second of the year, following a $750m three year in January, while the issuer has also tapped sterling twice in the past year.

“They have been pretty active in trying to expand their international presence,” said the lead banker, “and have succeeded in getting decent sponsorship as a result.”

Fédération des caisses Desjardins du Québec (CCDJ) leads Barclays, Crédit Agricole, DZ, Goldman Sachs, RBC and UBS opened books yesterday morning European time with initial price thoughts of the mid-swaps plus 19bp area for the October 2026 144A/Reg S dollar benchmark, expected ratings triple-A. With books at around $1.4bn, the spread was set at 17bp, and a $750m (C$946m) deal was ultimately priced on the back of some $1.2bn of orders good at re-offer.

CCDJ hit the market two days after Scotiabank’s record-breaking $3.5bn five year, which was also priced at 17bp, but a syndicate banker at one of CCDJ’s leads said the issuer had already been eyeing the market for some time before its compatriot’s deal.

“So it was not because of Scotia,” he added, “it just happened that Monday did not fit internally.”

However, he acknowledged that Scotia’s achievement had “shocked most of the marketplace”.

A larger size would have been possible for CCDJ, according to the lead banker, and also a tighter price.

“But the issuer wanted $750m,” he said, “and was pleased with 17bp.”

CCDJ’s and Scotiabank’s deals come four weeks after Royal Bank of Canada on 7 September priced a $2.5bn five year that was the biggest dollar benchmark covered bond in five years, but the lead banker said the dollar market had been further boosted by a back-up in rates since then.

“The real reason why this has caught a lot of steam is we’ve had five year Treasuries get to the 1% level, with swap spreads fairly stable,” he said. “That part of the curve has been the area of most interest for all corporate and rates investors.”

While RBC’s coupon was 1.05%, Scotiabank’s was 1.18% and CCDJ’s 1.20%.

However, he suggested a pause is now likely, with non-farm payrolls out on Friday, a public holiday on Monday, and bank earnings season starting on Wednesday.

“But if we have rates rise again steadily, and the cross-currency swap becomes more favourable to swap back to Canadian dollars, the capacity is certainly there,” he added. “You have to remember that we are looking at close to just under $9bn in US dollar covered bond issuance this year, and many investors had thought that we would be in the low to mid-teens from an issuance standpoint.

“It’s all about timing.”