FIIG has DirectBonded the Royal Bank of Canada 27 January 2026 subordinated bond. The bond presents an opportunity to diversify away from USD resource exposure into a stable, investment grade financial institution. The recent positive swings in oil prices and iron ore have seen resource bond prices shift higher. Existing USD investors could take some profit and risk off the table and switch some of their investment into the bank and still achieve returns of 4% pa
Royal Bank of Canada (RBC) is Canada’s largest bank, and one of the largest financial institutions in the world, based on a market capitalisation of CAD111.23bn (AUD113.5bn, 11 April 2016). RBC can be seen as similar to the CBA in terms of size and presence in Canada, however it has better diversification both geographically and by product.
Investing in the RBC bond is a more defensive investment compared to resources, while still generating a more attractive return than government or senior bank paper.
The Canadian banking system shares a similar profile to that of Australia in that the country is also rated AAA, and the banking system is strong and overseen by a globally respected regulator. Also similarly to the big four Australian banks, RBS has ratings in the ‘AA’ band.
The security itself is a ‘new style’ Basel III compliant subordinated Tier 2 note with a 10 year maturity date of 27 January 2026. It is a ‘bullet’ structure with no call date. The issue is very liquid with USD1.5bn outstanding. Like other Basel III compliant subordinated bonds, the RBC issue has a trigger which would convert the note into common equity if the bank is deemed non-viable by the Canadian regulator.
The bond is indicatively offered with a yield to maturity of 4% and a USD105.2 capital price.
Please refer to the factsheet for more information.
Note: Prices accurate as at 13 April and are subject to change. For more information please call your local dealer or FIIG on 1800 01 01 81.