TD and CFF emerge with bumper loads

4 min read
Americas, EMEA
Malicka Danna Sielinou

Toronto-Dominion Bank and Compagnie de Financement Foncier mined the euro covered market for considerable size on Monday, breaking decade-long records in the process.

TD Bank raised €5bn through a mortgage-backed dual-tranche transaction split across three and seven-year tranches. The €3.5bn three-year note is the single biggest euro covered tranche on record, according to IFR.

"It's an impressive volume that they have taken out of the market," a banker said.

"It was a little bit on the cheap side but not excessively [at the start]," the banker said. "However, the way the deal unfolded, it's a relatively tight price for the volumes that they ended up taking out."

BBVA, Credit Agricole, Deutsche Bank, ING, Santander and TD began marketing the shorter tranche at mid-swaps plus 25bp area and the longer one at plus 43bp area.

Books closed in excess of €4.6bn, with €200m of lead interest, for the three-year and above €2.25bn, including €80m of lead interest, for the seven-year.

This enabled the leads to print the €3.5bn 2026s at 22bp and the €1.5bn 2030s at 40bp; the kind of landing points one would expect to see for a trade half the size, according to the banker.

Market participants said TD paid new issue concessions of 4bp and 5bp-6bp for the short and long tranches respectively, in order to achieve size.

"They took advantage of very strong demand, especially for the short tenor and were fair to investors," a lead said.

"We always knew the three-year would be very strong, especially with real-money investors liking the defensive tenor and pretty high yield. But also the seven-year was rather positive. It's pretty decent, especially looking back at some of the other transactions of late."

Canadians have been scarce in the euro covered market so far this year, most of them having pre-funded in 2022. This was just the third from the jurisdiction and provides new reference points, since previous trades from BNS and HSBC Canada were five-year bonds.

CFF was fighting to take out size as it launched a €1.75bn September 2031 obligations foncieres.

"It's the biggest deal they've done in decade," said a lead on CFF. "It shows that maturities between five to six and nine years are also well accepted by the market. It also shows that order books are still in good condition and the ECB support is not needed."

ABN AMRO, BayernLB, CaixaBank, Commerzbank, HSBC, Natixis, Rabobank and SEB opened books for the benchmark trade at mid-swaps plus 31bp area.

The leads were able to print the bond at 26bp with orders peaking at €2.6bn-plus. The final tally stood above €2.5bn (including €210m of lead interest) which represents the largest book seen on a euro covered CFF trade since July 2021.

While the first banker said the French issuer conceded 3bp, the leads said the new issue premium was thinner, around 1bp.

The first banker said: "They've done well in terms of landing where they did and for the fact that, a week ago or so, you'd have had to pay 4bp-5bp in new issue concession for that. It does say something about the overall strength of the market."

Further covered bond issuers are positioning themselves in the starting blocks.

Raiffeisen Bank International has picked Commerzbank, Deutsche Bank, DZ Bank, Natixis, RBI and UniCredit to arrange a a €500mn three-year mortgage-backed transaction. "Looking at comparables, fair value will be in the context of 28bp-31bp," said a banker close to the trade.

Bank of Aland is also targeting the three-year spot with its upcoming euro sub-benchmark bond. LBBW, Nordea and Swedbank concluded a roadshow on Friday that engaged with more than 50 investors, with the balance of pricing feedback in the low 20s. Also in the Nordic jurisdiction, Landsbankinn is planning a €300m no-grow soft-bullet mortgage-backed bond via Barclays, Natixis and UBS.

Coventry Building Society is preparing a £500m no-grow five-year Sonia-linked floating-rate benchmark covered bond with Barclays, JP Morgan, NatWest Markets, TD and UBS as leads.