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TD, Scotiabank Issue $11 Billion of Repo-Eligible Bonds

Esteban Duarte

(Bloomberg) -- Toronto-Dominion Bank priced the largest covered bond on record from a Canadian lender on Friday, days after the country’s central bank widened the range of securities it takes as guarantee for repurchase transactions. Bank of Nova Scotia followed with a similar deal Monday.

TD, the country’s second-largest bank by assets, issued C$10 billion ($6.9 billion) of floating-rate covered bonds maturing in 1.5 and 3 years, according to data compiled by Bloomberg. Bank of Nova Scotia priced C$.5.5 billion of 2-year fixed-rate and 3-year floating-rate covered bonds, the data show.

The Bank of Canada said March 18 it is starting to allow participants in its term repo operations -- mostly banks -- to pledge their own covered bonds at collateral for such transactions. The change is part of a wide range of measures announced in recent weeks to shore up the country’s financial markets.

“TD notes the Bank of Canada recently expanded its eligible collateral to include own-name covered bonds, among other assets,” TD spokeswoman Julie Bellissimo said in an e-mailed statement.

Scotiabank’s covered bonds will be used by the lender to buffer its central-bank eligible collateral, a person familiar with the matter said.

TD’s C$5 billion portion of 18-month floating-rate covered bonds were priced to yield 200 basis points over 1-month CDOR, and the 3-year floater floater was priced at a spread of 170 basis points. Scotiabank’s C$2.75 billion of notes due 2022 were priced at 185 basis points over similar-maturity government debt. The 2023 floating-rate notes were priced at a spread of 165 basis points over 3-month CDOR.

TD’s covered bonds are the largest of their kind from a Canadian bank, according to Bloomberg records going back to 2007.

(Updates with Scotiabank transaction beginning in first paragraph)

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