Wednesday, December 9, 2009

CIBC sells covered bonds

Originally posted on the Globe & Mail's Streetwise by Andrew Willis:

CIBC tapped the centuries-old clovered bond market in Europe on Tuesday with a 675-million Swiss franc financing.

Covered bonds are backed by both a mortgage loand and the explicit guarantee of the institution that issues the paper, a belt-and-suspenders approach to raising capital that garnered a triple-A rating for the CIBC (CM-T68.68-0.46-0.67%) issue. That high rating, and the claim on assets, means this floating rate debt pays an interest rate just 10 basis points over Libor, the short-term inter-bank borrowing benchmark.

CIBC has filed the paperwork for up to 8 billion Euros in covered bond issues. The Canadian bank followed a path blaxed by Royal Bank of Canada, which become the first domestic institution to sell covered bonds with a offering in 2007.

CIBC, Royal Bank of Scotland and UBS led the covered bond offering.

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