Banks are turning to their most important clients to feed investor demand for income-generating secturies.
That would be themselves.
The past 48 hours saw three large bond sales from financial institutions, all of which were upsized in the face of strong investor demand. Institutions and individuals are looking for interest rates superior to the skinny yields on government debt, and the banks are glad to oblige.
Caisse Centrale Desjardins du Quebec sold $500-million of medium term notes Thursday. Desjardins Securities led the transaction, along with BMO Nesbitt Burns and Scotia Capital, and it started out as a $300-million deal.
In addition, Thursday saw Citigroup Finance Canada revisit the Maple bond sector – that’s bonds from a foreign company that are denominated in Canada dollars.
Citigroup (C) raised $400-million after initially setting a $200-million minimum on the issue. TD Securities and RBC Dominion Securities led the transaction.
And on Wednesday, CIBC sold $1-billion of four-year senior deposit notes, after initially launched the deal with a $500-million target. CIBC World Markets led that transaction.
For those interested in the cost of capital at banks these days, the CIBC notes were priced at an 82 basis point premium to the comparable government of Canada bond.
Desjardins sold $250-million of bonds due in 2011 with a rate that floats at 58 basis points over the three-month Canadian benchmark rate, which is known as CDOR. The financial co-operative also placed $250-million of notes due in 2012 that pay 70 basis points over CDOR.
Citibank, which has well-documented balance sheet issues, sold five year bonds that yield a staggering 433 basis points over the comparable government of Canada bond.