Bond investors swooped in to buy Bank of Nova Scotia’s first senior bail-in bonds in its home market on the first day after the deal was sold.

The spread on Scotiabank’s $1.5 billion of five-year bonds tightened to about 102 basis points more than Canada government bonds, according to Bloomberg Valuation bid prices. That compares with at spread of 104 basis points set yesterday.

Canadian systemic banks began building their buffers of senior bail-in eligible securities in September 2018. The bonds are designed to help prevent a repeat of the 2008 financial crisis when taxpayers worldwide had to rescue banks. Bail-in bonds are riskier than deposit notes because they may be converted to equity in the event a bank runs into trouble.

“The market has been waiting for a deal from them for some time now,” said Joanne Chen, a fixed-income analyst at BMO Capital Markets. The “resumption of investor risk-on sentiments as we head into the fall will help bring back issuance into the loonie market.”

The biggest Canadian banks together may have to issue at least US$80 billion more of bail-in eligible senior bonds to comply with total loss-absorbing capacity requirements by Nov. 1, 2021, according to Bloomberg Intelligence estimates.

While Scotiabank hasn’t issued senior bail-in bonds in loonies, the lender had raised $8.1 billion of the bonds overseas by the end of August. That compares with $28.6 billion they need by November 2021, BI says.

Scotiabank focused its senior bail-in funding internationally, where pricing was more attractive than in the domestic market, according to a person familiar with the matter. After its absence from the Canadian-dollar senior bond primary market, the scarcity of bonds allowed the issuer to get better pricing, the person said.

Eighty-two buyers took part in the deal, whose book reached about $4.4 billion, according to people familiar with the with communications provided by deal arrangers to investors.