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Lenders bolster reserves and raise funds amid credit test

by Steve Randall on 12 Mar 2020

Some of the biggest players in Canada’s home financing industry acted to strengthen their position Wednesday amid an incoming test for credit markets.

Bloomberg Data reported that Scotiabank and TD each raised $1.75 billion using senior bail-in bonds which spread the banks’ risk to investors rather than leaving the ‘too big to fail’ lenders to seek bail-outs from the government.

Covered bonds were also used by Scotiabank in the Euro market to raise a further $1.25 billion. These bonds are backed by a pool of mortgages and are considered an extremely stable option.

CMHC also issued bonds worth $6 billion with the Bank of Canada buying $500 million.

“The deal was well subscribed with around 75 investors in the book, of which approximately 40% was distributed to international investors,” CHMC treasurer David Ayre told Bloomberg.

With a slowdown in the global and Canadian economies now looking inevitable as a result of the coronavirus outbreak, ensuring that the largest lenders have adequate buffers and liquidity is essential, especially with increasing calls for a potential recession.



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