Canada

Guarantor: CPP Investment Board

Public sector borrowers wrapped up a trio of short end dollar trades on Tuesday, with the tightest issuer able to grind in pricing to the lowest level from an SSA this year and the higher yielding names finding ample demand despite ending up at similar spreads. SSA bankers are confident that the strong conditions will also ring true at the long end for KfW, which has mandated for its first 10 year dollar benchmark in nearly three years.

Public sector borrowers are pouring into the three year part of the dollar curve after a series of issuers printed strong deals in the tenor last week.

Sterling covered bond supply so far this year has been high but Toronto Dominion Bank showed on Monday that demand was also plentiful, as it issued another tightly priced transaction with a strong book.

Guarantor: Canada

The three year part of the dollar curve took centre stage for public sector issuers this week, having played second fiddle to fives so far this year. Issuers were met with just as strong a reception in the short end of the curve as they have enjoyed in fives so far — and SSA bankers believe some could be tempted to test the longer end.

DNB Boligkreditt and Canadian Imperial Bank of Commerce this week issued the first five year covered bonds of the year and found strong demand, even though there was a sensitivity around the final spread.

Dollar SSA deals are showing little signs of a hangover from a public holiday in the US on Monday, with all three of Wednesday’s trades well over subscribed and pricing inside guidance.

Canadian Imperial Bank of Commerce followed DNB Boligkreditt with the second five year covered bond of the year. The tenor, which appeals to the broadest audience and offers the best execution certainty, should become increasingly popular as tapering of central bank purchases and refinancing of the central bank liquidity takes effect.

A widening in dollar swap spreads since the end of last week should help support a trio of dollar deals on screens for Wednesday’s business, said SSA bankers.

Appetite for quality dollar issuance is strong as 10 year Treasury yields hover above 2.54%, prompting two borrowers to hit screens on Monday with dollar benchmarks.

Price sensitivity is becoming a material theme in covered bond deals issued this week, and the first Canadian covered bond of 2018, issued by Bank of Nova Scotia on Friday, was no exception.