National Bank of Canada raises C$750 million; bond retirements trim Canadian debt holdings

By Cristal Cody

Prospect News, Aug. 16 - Canadian primary action continued at a trickle on Thursday with an upsized C$750 million offering of five-year bank deposit notes as vacation season takes hold and desks thin out, informed bond sources said.

"That and Hydro One from a couple of days ago - that's all we've got," a high-grade bond source said. "There's a lot of empty desks on the Street."

National Bank of Canada sold an upsized C$750 million of the five-year deposit notes on Thursday, following corporate issuance earlier in the week from Hydro One Inc.

Hydro One sold C$235 million in a reopening of its 3.79% 50-year medium-term notes (A1/A+/DBRS: A) at 99.709 to yield 3.803% on Monday, an informed bond source said.

On Wednesday, Canada Housing Trust (Aaa/AAA/DBRS: AAA) tapped the Canadian mortgage bond market with an upsized C$4.65 billion offering in two tranches of bonds.

Many market participants are out over the week with few deals planned in August, sources said.

"Pretty slow week," one bond source said on Thursday, noting the pace was "typical for this time of year. It's cottage season."

Traders also report thin trading, which is why corporate bonds have stayed fairly unchanged over the past week.

The Markit CDX Series 18 North American investment-grade index, which had stayed flat for about a week, firmed 2 basis points on Thursday to a spread of 101 bps.

The Markit CDX Series 18 North American high-yield index rose to 98.12 from 97.67.

Canadian government bonds were mixed. The two-year note yield fell 1 bp to 1.24%, while the 30-year bond yield rose 4 bps to 2.49%.

In economic data, manufacturing sales in Canada fell 0.4% to C$48.9 billion in June, Statistics Canada said.

National Bank of Canada prices

In the domestic offering on Thursday, National Bank of Canada brought C$750 million of 2.689% five-year deposit notes (Aa2/A/DBRS: AA) at par, according to an informed bond source.

The notes due Aug. 21, 2017 priced at a spread of 115 bps over the Government of Canada benchmark.

The deal was upsized from C$500 million.

National Bank Financial Inc. was the bookrunner.

The financial services company is based in Montreal.

Foreign holdings eyed

Foreigners reduced their holdings of Canadian bonds by C$7.8 billion in June, the largest divestment since December 2008, Statistics Canada said on Thursday.

"This resulted from a C$17.5 billion retirement of maturing instruments, mostly Canadian dollar-denominated bonds from the federal government and its enterprises," the agency said. "These retirements were moderated by non-resident investment in Canadian bonds on the secondary market in June, mainly government securities."

Canadian investors acquired C$4.1 billion of foreign bonds in June, the largest acquisition since November 2010.

The acquisitions were led by C$3 billion in purchases of mainly short-term U.S. government bonds, Statistics Canada said. The remainder of the activity was from purchases of corporate debt in the maple bond market.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.