Canada

Royal Bank of Canada (RBC) has become the first issuer to guard against negative rates in the sterling market by structuring a Sonia-linked senior deal with an artificially high coupon.

Trading levels given are bid-side spreads versus mid-swaps and/or an underlying benchmark and bid-yields from the close of business on Monday, July 27. The source for secondary trading levels is ICE Data Services.

Reform of the US government sponsored enterprises (GSEs) has always been considered a necessary precursor to establishing a US covered bond legal framework. But with the Covid-19 crisis and November’s presidential elections diverting attention, dollar covered bond issuance will remain dominated by foreign banks, with near term supply prospects likely to be determined by the cross-currency basis swap.

CPPIB Capital mandated banks on Friday for its third dollar benchmark this year as it looks to jump on the back of a strong reception for Canadian and Japanese borrowers in the currency this week.

A trio of SSA borrowers hit the market for dollar paper this week, testing the waters across the curve and finding investors receptive. Although the top tier names are mostly well funded, demand is still hot for the extra yield offered by the second layer of SSA borrowers.

The Province of Alberta hit the market for a 10 year deal, raising $2bn and impressing onlookers with a solid order book. Its peer Quebec will follow up on Thursday with a five year. But despite Alberta's success, further supply at the tenor may be limited.

Investors appeared to be more sensitive of price movements in new issues of covered bonds this week, with valuations in the asset class having returned to within touching distance of their January levels.

Barrick Gold Corp has raised HK$1.63bn ($209.7m) after paring most of its stake in Chinese firm Shandong Gold Corp.

CPPIB Capital rounded off its sterling curve on Friday after only making its debut in the currency in January. The Canadian borrower aims to maintain a regular presence in this market as a result of its long-term investments in the UK.

Market participants re-examined the prospects for covered bond supply in sterling this week in the wake of two deals from SSA borrowers in the currency. Spreads have tightened and issuance conditions have improved but that will have to be balanced against bargain basement priced funding available from central banks, bankers said on Thursday.

The World Bank returned to the Canadian dollar on Wednesday with a new C$1.5bn ($1.11bn) sustainable development bond, as movements in the cross currency basis swap, as well as the spread to Canadian Mortgage Bonds (CMBs), allowed the supranational to print the largest SSA Maple deal since last July.

Trading levels given are bid-side spreads versus mid-swaps and/or an underlying benchmark and bid-yields from the close of business on Monday, June 8. The source for secondary trading levels is ICE Data Services.