First National Financial LP

A note on the May Canada Mortgage Bond transaction

  • First National Financial LP

Due to COVID-19 related funding stressors, there will be a change to the upcoming CMB issuance to add more liquidity to the market.  There will be an issuance of a larger than normal 10-year CMB and a new issuance of a 3-year CMB.  The market was told to expect the 10-year issue to be $3-4 billion in size (versus a normal size of $2 billion) while the 3-year issue will be in the $4-5.5 billion range. The 10-year deal will be a reopening of the June 2030 bond, which is currently trading at a yield of 1.05%.   For context on where the 3-year deal may open if issued today, the June 2023 CMB bond is trading at a yield of 0.64%.  Both of these developments will add liquidity to the system and allow lenders to fund more 10 year loans and the potential development of a 3-year insured term.

In other news, Tiff Macklem was appointed Bank of Canada Governor this morning. Macklem, who is the current dean of University of Toronto's business school, is the first private sector appointment by the Bank of Canada. It is worth noting that some consider Tiff Macklem to be a key architect for Canada's recovery working as the top aide under Jim Flaherty during the 2008/2009 financial crisis. Suffice to say he won't be taking any vacation anytime soon.