Quebec sells C$500 million 10-year notes; muni, corporate deals forecast; provincials firm

By Cristal Cody

Prospect News, May 1 - The Province of Quebec came with an offering of C$500 million of 10-year notes on Tuesday a day after the Province of Ontario brought C$750 million of 10-year paper.

Provincial issuance is expected to be "pretty steady" in May, a syndicate source said. "Ontario and Quebec will continue to tap the market as they usually do. Depending on market tone, we also expect municipal issuance to pick up in the next few weeks."

A pickup in corporate primary activity in Canada is forecast as well with a number of roadshows in the works for May, a source said.

Battle Creek, Mich.-based Kellogg Co. started a roadshow on Tuesday in Montreal and will continue the roadshow in Toronto on Wednesday for a potential maple bond offering.

The Auckland Council of New Zealand is holding a roadshow in Canada over the week for a potential maple issue.

407 East Development Group General Partnership in Ontario is holding a roadshow for two tranches of senior bonds (DBRS: A), which include C$455.7 million of short-term senior bonds and C$120 million of long-term bonds.

Also ahead, Capital City Link General Partnership, a special-purpose entity created to design, build, finance, operate and maintain a portion of an Edmonton road, plans to bring an offering of C$535 million of senior bonds due 2046 (DBRS: A) in the next couple of weeks.

Issuance in Canada's financial sector likely will stay light with Canadian banks headed into earnings blackout soon, a source said.

"Closer to the end of the month, we may have more issuance," the source said. "A lot of issuers and investors tend to take advantage of the June 1 coupon. We usually have a lot of cash being put into the system."

Investment-grade bonds ended tighter. The Markit CDX Series 18 North American investment-grade index firmed 1 bp to a spread of 94 bps.

Provincial bonds traded about 1 bp to 2 bps tighter on the day on "better buying," a source said.

Five-year provincial notes traded about 1½ bps tighter, 10-year paper firmed about 1 bp and long bonds traded 2 bps better.

"Credits in general are well bid," the source said.

Both the Province of Quebec's 3.5% notes due 2022 and the Province of Ontario's 3.15% notes due 2022 traded about 1 bp tighter going out.

Government bonds edged lower. Canada's 10-year note yield rose 1 bp to 2.04%. The 30-year bond yield ended up 1 bp at 2.61%.

Quebec sells C$500 million

The Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million in a reopening of its 3.5% medium-term notes due Dec. 1, 2022 at 103.008 to yield 3.163% on Tuesday, a bond source said.

The notes priced at a spread of 105 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the bookrunner.

The issue originally priced on Nov. 29, 2011 at 100.6 to yield 3.434%, or a spread of 115 bps over the Government of Canada benchmark.

Quebec sold C$500 million of the notes in a reopening on April 12 at 102.663 to yield 3.202%, or a spread of 107.5 bps over the Government of Canada benchmark. The total outstanding now is C$4 billion.

In the secondary market, Quebec's 3.5% notes due 2022 firmed 1 bp going out on Tuesday.

Ontario firms

The 3.15% notes due 2022 the Province of Ontario (Aa2/AA-/DBRS: AA) reopened on Monday in a C$750 million offering traded tighter on Tuesday, a source said.

Ontario priced the notes at spread of 96 bps over the Government of Canada benchmark.

"The bonds closed at 95 [bps] on the day yesterday and opened at 95½ [bps] today, so about a basis point tighter on the day," the source said.

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