Canadian Banks Join Bond-Market Blitz as Sales Hit $17.4 Billion

Canadian banks are joining the global rush to the bond market, selling at least C$22 billion ($17.4 billion) of debt already this month. 

Just one week into September, the volume is already enough to make it the second busiest month of the year after June, when some C$26 billion were sold. It’s also already the biggest slate for the issuance-heavy month since 2015, according to data compiled by Bloomberg. 

The bond market is being deluged with new deals this week by governments and corporations, with businesses seeking to move before interest rates rise when central banks pull back on monetary stimulus ushered in after the pandemic. 

In Canada, the borrowing comes after major lenders, including Toronto-Dominion Bank to Canadian Imperial Bank of Commerce, reported better-than-expected quarterly earnings late last month, aided by the reopening of the nation’s economy. 

“There continues to be positive sentiment in regards to the Canadian economy and interest in Canadian issuers internationally,” said Chadwick Westlake, chief financial officer at Equitable Bank. 

Equitable issued its first euro-denominated covered bonds, a type of debt secured by a earmarked pool of mortgages on top of a senior call on the issuer. The 350 million euros of 3-year covered bonds were priced at a spread of 15 basis points over the mid-swaps rates, tighter than the low 20-basis-points range initially offered to investors, according to people familiar with the matter.

TD Bank has been the biggest issuer this month among the Canadian banks, raising $4.5 billion in the U.S. dollar market and another C$1.25 billion domestically, according to data compiled by Bloomberg. CIBC has issued covered bonds in Australian dollars and Bank of Nova Scotia on Wednesday priced 1.5 billion euros of covered bonds. Bank of Montreal sold in the British pound market.

The sales also include HSBC Bank Canada’s debut in the euro-denominated covered bond market, where it priced 750 million euros of five-year debt Tuesday.

“The market has been pretty stable, I think certainly for HSBC,” said Marty Halpin, head of markets treasury at HSBC Bank Canada. He said the issue was about four-times oversubscribed. “We could have up-sized it, but we didn’t have the funding needs at this time.”

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