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Canada's banks racking up U.S. dollar debt Add to ...

The Big Six banks love U.S. dollar debt these days.

On Tuesday, Royal Bank of Canada sold another $2-billion of new debt, and on Wednesday morning Bank of Montreal announced its own $2-billion U.S. dollar covered bond issue.

The year-to-date stats are staggering. In total, the Big Six have issued almost $80-billion in U.S. dollar denominated debt, with RBC leading the charge with about $18-billion, according to Bloomberg. To put that in context, in total, Canadian issuance by corporates and financials (excluding maples) total about $70-billion this year.

The U.S. market is an attractive one for the banks. Not only is it much bigger, so there’s much more liquidity and many more buyers than in Canada, but it also offers better pricing right now. RBC’s deal got done at a better rate than it would have north of the border.

Canadian banks have pounced on these benefits. So far this year, the $80-billion that has been raised in U.S. dollar debt beats 2010’s full-year total of $56-billion by over 40 per cent. Makes you wonder what exactly the banks are doing with all this money. And it's kind of shocking that investors are so willing to buy, considering that troubled banks have so many people worried around the world.

RBC’s latest deal totalled $2-billion (U.S.), spread across fixed coupon bonds and floating rate notes. The three-year fixed rate debt priced at a coupon of 1.45 per cent, while the three-year floating rate notes priced at 70-basis points above LIBOR.

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