Toronto-Dominion Bank impressed on Tuesday as for the second time this year it landed a hefty €2.5bn covered bond, as part of a globe-trotting funding spree targeting three different markets in just two days.
Canadian banks have ramped up their issuance and have been notably active across global covered bond and senior unsecured markets this year, with their prolific approach neatly demonstrated by TD's midsummer funding dash.
The bank's new three-year euro issue follows hot on the heels of a US$2bn three-year covered that it priced at 79bp over SOFR mid-swaps on Tuesday. The bank is also active in the Australian dollar market, building books for a fixed and/or floating rate three-year covered bond, having released guidance of three month BBSW/ASW plus 93bp area.
The euro offering was meanwhile marketed with initial guidance of mid-swaps plus 20bp area.
Leads Danske Bank, DZ, ING, Natixis, TD and UniCredit went on to set the spread at 17bp with books above €2.8bn (excluding JLMs), for an expected size of €2bn.
After demand rose further to top €3.3bn (including €90m JLM interest), the size was ultimately fixed at €2.5bn.
"We're very pleased with the response," said a banker at one of the leads.
"We had one eye on the ECB meeting tomorrow and so couldn't be entirely sure how prepared investors would be to step up today. But the backdrop feels very favourable across asset classes and having seen the results of the two [euro covered] deals this week we felt a shorter maturity like a three-year should be well-received even with the ECB tomorrow."
Such large transactions are rare in the euro covered bond market, although the deal is notably TD's second €2.5bn covered of the year, following a five-year transaction in March.
Bankers credited that achievement to TD's popularity with investors, as one of the top North American banks, and to its relative rarity in the euro covered bond market over the last couple of years, which meant accounts had plenty of capacity for the name.
Demand was further supported by the attractive pick-up the deal offered versus core European supply and a double-digit concession over TD's secondary curve. The deal's fair value was seen at 5bp-6bp.
Bankers said the deal's success further demonstrates Canadian banks' ability to take impressive size out of the market. Bank of Montreal, for example, priced the biggest euro covered bond since the global financial crisis in January, landing a €2.75bn five-year, and followed that up two months later with a €1.75bn four-year.
"It can't continue ad infinitum but if you're offering these kind of concessions on three-year paper, people will make room," said a syndicate banker away from TD's deal.
Bankers said TD's final 17bp spread worked out around 5bp inside the level the bank achieved with its US dollar transaction on Tuesday.