Canada

Sterling issuance from non-UK SSAs kept up its record start to the year this week, as UK bank treasuries are searching for safe places to put sterling, afraid the country will leave the EU without an exit deal.

The socially responsible investment market in SSAs is picking up pace in 2019, with a supranational bringing a deal in a debut format and other issuers preparing inaugural trades.

The Sofr-linked bond market in dollars is lagging behind the progress being made in Sonia-linked sterling, SSA bankers warned this week, with some issuers waiting to see which Sofr model becomes accepted practice.

Fearful of missing out and in the absence of competing credit supply, investors piled into higher yielding covered bonds offered by Canadian, Australian and Swedish issuers this week. A negative new issue premium Royal Bank of Canada’s five year epitomised the state of investor frenzy.

Four covered bond issuers returned to the market on Wednesday and, in contrast to the start of the year when concessions were 5bp-7bp, none paid more than 2bp.

Three sterling deals hit the SSA market on Tuesday, bringing this year’s total volume to more than double last year’s and indicating that issuers and investors are yet to be put off by the confusion surrounding Brexit.

Fearful of missing out and, in the absence of competing credit supply, investors piled into six covered bonds on Tuesday with a combined value of more than €6bn.Royal Bank of Canada’s deal epitomised the state of investor frenzy as it was able to issue the largest deal of the year with a negative new issue premium.

Export Development Canada is set to become the fourth public sector borrower to issue a debut Sonia bond this year, after picking banks on Monday for a three year bond linked to the reference rate. Meanwhile, KfW will return for its second sterling benchmark of 2019, sticking with a five year maturity it issued in earlier in the month.

Dollar SSA issuance picked up in earnest this week after a slower than usual start to the year, with a rich variety of borrowers printing deals, some in record size or with record books. Conditions are such that SSA bankers are confident supply will keep coming and demand stay high for the next few weeks — cheering news for one sovereign issuer looking to make a comeback in the currency.

A record start to the SSA sterling market came to a halt early this week, with borrowers avoiding prints as the UK Parliament delivered a historically large defeat to the government over its planned withdrawal agreement with the European Union. But once the big risk of the event was out the way, supply picked up — although with Brexit’s direction as uncertain as ever, further blocks to issuance are likely.

Rating: Aa1/A+/AA

Given the uncertainty created by Tuesday’s Brexit vote, the issuance frontloaded into the Swiss franc market at the start of the week was dominated by domestic borrowers.