Canada

Having dropped off in early March, Swiss franc issuance has bounced back in the last fortnight, buoyed by returning investors flocking to low investment-grade rated borrowers, like triple-B rated cement manufacturer LafargeHolcim, and piling into a record-breaking foreign covered bond.

CPPIB Capital and L-Bank found strong demand for two year dollar deals on Thursday as central banks seek haven assets with chunky spreads to US Treasuries. For L-Bank, it also brought a sense of redemption after it had to pull a deal two weeks ago in the same currency and maturity following a lack of demand.

The euro market for SSAs has returned to life in impressive style, but borrowers outside the ECB’s asset purchase programme are meeting with a chillier reception than their European counterparts.

A leading covered bond investor has reacted positively to a series of measures announced by Canada’s Office of the Superintendent of Financial Institutions’ (OSFI) which have effectively provided stable access to emergency funding, including a temporary increase in the amount of covered bonds the country's banks can issue. The move comes after a heavy spell of supply that had sparked concerns that Canadian banks were struggling for cash.

CPPIB Capital hit the euro market on Monday, becoming the first SSA borrower not eligible for QE to access the market since the coronavirus outbreak shuttered the market. A fellow Canadian is set to follow suit.

Toronto Dominion Bank attracted a slightly larger order book for its three year dollar covered bond on Friday than Bank of Nova Scotia did for a similar deal issued on Wednesday. Both deals offered a considerable pick-up to where they would have been expected to be priced in euros, but the overall spread outlook remains a subject for hot debate. At the same time on Friday, Canadian Imperial Bank of Commerce was set to issue a ‘blow out’ three year Swiss franc deal.

Issuers and investors in the Swiss franc market are grappling with much wider spreads on domestic and foreign issuers because of the volatility around the coronavirus pandemic.

Bank of Nova Scotia issued its first dollar covered bond benchmark since 2016 on Wednesday. The deal follows a series of retained Canadian dollar covered bonds that were pledged to the Bank of Canada after it recently broadened repo eligibility to include the asset class.

Europe's bank funding officials are not certain how their borrowing plans are likely to change but seem agreed there is little point in hitting the primary market until serious liquidity returns, That has given Canada's banks the run of the place with this week with another deal emerging from Canadian Imperial Bank of Commerce on Friday.

Royal Bank of Canada, Bank of Montreal and Toronto Dominion Bank all issued euro covered bonds in good size this week, finding big savings over senior unsecured issuance. One leading investor said bringing these deals in a fragile market was opportunistic and reflected The Bank of Canada's more restrictive provision of emergency liquidity than in Europe.

In a sign of the strength of the Canadian banking sector, Bank of Montreal and Toronto Dominion Bank were able to access the euro covered bond market in good size on Thursday with deals that provided a substantial saving compared to senior unsecured issuance. The deals followed a series of measures to ease liquidity from the Bank of Canada, including widening repo' eligibility to covered bonds.

Executing bond syndications from home has proved to be feasible, bankers said in the wake of Royal Bank of Canada’s five year covered bond issued on Tuesday. Even so, the lack of physical back-up from nearby colleagues and the seamless access to certain key functions such as trading means that working from home is very much second best in practice compared with normality.