Canadian lenders issue flurry of bonds amid uncertainty

Canadian banks have already raised more cash in bond markets than in the whole of 2021 as jitters about the global economy and conditions in the financial markets run high.

With almost seven months to go in 2022, Canadian bank sales of corporate bonds in the domestic and international markets are close to $168 billion dollars so far this year. That's more than the $153 billion raised last year and $155 billion in 2018, the previous record, according to data compiled by Bloomberg.

The Bank of Canada raised interest rates by 50 basis points on Wednesday for a second straight time as it pushed ahead with monetary tightening and warned that it may act “more forcefully” if needed to tackle inflation that is running at the highest in three decades. That's even as senior managers at Goldman Sachs Group Inc. and Jpmorgan Chase Co. are warned of tougher times ahead amid a string of shocks rattling the global economy.

National Bank of Canada priced in the U.S. dollar market Thursday at $750 million of senior bail-in bonds, notes that are eligible for the banks' total loss-absorbing capacity, or TLAC. Larger rival Toronto-dominion Bank raised $5.5 billion of the same type of securities the day before as companies bring issuance forward in order to get ahead of rising funding costs.

“In an uncertain environment, optimizing liquidity and TLAC ratios becomes important,” said Yassir Berbiche, head of treasury at Desjardins Group, North America's largest financial services co-operative. “Such large issuances can meet both of these requirements. The rise in rates combined with the reduction in central bank balance sheets will keep pressure on the yield curve as well as on credit spreads.”