Canadians show market to be open after July turns good for FIG

Canadian supply took centre-stage in the FIG flow market in the second half of July, delaying a summer slowdown that is showing signs of settling in after a Eu1bn five year covered bond for Canadian Imperial Bank of Commerce yesterday (Thursday), although the market is said to be in good shape.

In euro benchmark covered bonds three new issues have hit the market since the last edition of Nordic FIs & Covered on 11 July.

Total FIG funding in July was up on June, when fears about the end of monetary stimulus troubled markets.

In covered bonds, UniCredit Bank Austria priced a Eu500m five year debut mortgage Pfandbrief last Tuesday (23 July), before the focus switched to Canadian supply.

Royal Bank of Canada took advantage of a basis-swap-driven convergence of US dollar and euro spreads to sell the first Canadian euro covered bond since 2008 last Thursday, a Eu2bn seven year deal.

The issuer has been on a funding spree, beginning with a US$1.75bn three year covered bond on 16 July before moving to a $2bn five year senior unsecured issue, then its euro covered bond, and finally a A$1.25bn three year covered bond launched on Tuesday.

Canadian peer CIBC followed suit yesterday with its inaugural legislative covered bond, a Eu1bn five year deal. Both CIBC’s and RBC’s deals were heavily oversubscribed, with order books of Eu3bn and Eu3.5bn, respectively.

Viet Le, FI, covered bonds and ABS syndicate manager at Crédit Agricole CIB, said that the Canadian covered bond transactions were very well received and demonstrated the strength of demand for paper in the market.

“Yes, it has been a long time since Canadian supply was awaited so the huge demand was not surprising,” he said, “but still, the size of the order books and the number of accounts involved show that liquidity and investors’ focus are intact.

“There was some talk about the market winding down for the summer but that has clearly not yet happened and the market is very much open, especially for stronger jurisdictions.”