Amplus Post Quarter-End Bank Funding Update

Here’s a quick post-Q3 recap on Canadian bank supply for issuers that have access to global markets. In the Q3 Amplus commentary, we mindfully repeated ourselves on two occasions:

The outperformance of Canada echoes our shared view that Canada was the cheaper market to invest in. The divergence between both markets has finally narrowed, and we suspect that supply, mainly from banks, can now become more frequent in our domestic market. 

Unlike before, issuance for domestic banks now becomes a real risk in Canada. With that, we’ve taken it as an opportunity to sell down our bank exposure, as we expect more supply to come to Canada.

Since then, we have seen three banks (RBC, TD and BNS) come to market with a total supply of $7bn in senior issuance, which does not include the $2.5bn seen in very late September from BNS and CCDJ. In total, $9.5bn has come to Canada in just over 30 days. Prior to this, Canada only saw $6.5bn for all of 2024 in senior bail-in bank supply. Talk about how things can change quickly when relationships normalize. With that said, spreads in the space are 5bps off their recent tights and bonds are once again trading marginally cheaper compared to US$ markets. The chart below compares the basis between US$ and CAD$ for TD senior bank credit spreads.

G-SPD ($CAD EQUIV) SPREAD

Bank treasuries are constantly looking at their funding matrix for the cheapest markets to issue in. As with all portfolio managers at Wealhouse, we constantly try to stay one step ahead of trends and possible market moves. This is a great example of how our focus on global markets and different currencies ultimately benefits our investors. We can better manage our expectations of supply in credit, while tactically positioning our portfolio to benefit from such trends.