Thursday, September 8, 2011

How healthy are Canadian banks

By yesterday's standard VERY.  Toronto Dominion Bank  (TSE:TD) raised $5 billion in covered bond yesterday, 40% 2 year 60% 5 year, oversubscribed largest ever bond offering for a Canadian bank, and the yield was not bad 0.875% and 1.62% for the 2 year and 5 year respectively (below projection) [Note: bonds were issued below par so that actual yield is a bit higher, still]

How many banks could raise that kind of money at these yields, current Bank of Canada 2 year yield are 0.91% and the 5 year is at 1.46%. So TD (AAA rated by the way) raised money at zero premium to the Bank of Canada in the two year and about 25 bps in the five year.

Impressive!

Also for all those who think that Canadian banks are in trouble, the same pricing for a US bank would be at least 100 bps higher (if they could get it).

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