Primary quiet, awaits Greek outcome; BAA may bring deal; Connacher, provincials weaker

By Cristal Cody

Prospect News, June 15 - Canadian bond markets saw light activity on Friday as the market anticipates the outcome of Greece's election on Sunday following a busy week of new issuance from corporate and provincial issuers.

"It's been relatively quiet," a syndicate source said. "A lot of accounts are just looking to pare back exposures before the election. Tone was somewhat positive."

Primary activity remains up in the air for the week ahead pending market reaction to the Greek election and the outcome of a Federal Reserve two-day policy-setting meeting that starts on Tuesday.

BAA Funding Ltd. wrapped a roadshow on Friday following one held in April, and the company is expected to bring a seven-year Canadian dollar-denominated note offering, according to a bond source.

"There's that and maybe a U.S. issue as well," the source said. "It's still uncertain on that."

Corporate bonds were better a second day. The Markit CDX Series 18 North American investment-grade index tightened 3 basis points to a spread of 118 bps on Friday.

Connacher Oil & Gas Ltd.'s Canadian and U.S. dollar second-lien notes traded about 2 points lower in tandem with the company's declining stock price over the week, a bond source said on Friday.

Provincial bond spreads traded 1 bp to 2 bps wider on the day.

Hydro-Quebec's new five-year notes edged wider "so it's underperforming a little bit," another source said.

The Province of Alberta's new five-year notes traded 2 bps better, while the Province of New Brunswick's long bonds sold on Wednesday traded better late in the week, a source said.

Canadian government bonds saw gains on Friday. Canada's 10-year note yield dropped to 1.73% from 1.8%. The 30-year bond yield fell 4 bps to 2.34%.

BAA on horizon

BAA Funding may bring a seven-year Canadian dollar-denominated note offering and/or a U.S. dollar-denominated deal, a bond source said on Friday.

The holding company for London-based airport operator BAA Airports has held a couple of roadshows in Canada since April and finished the latest one with stops on Thursday and Friday in Winnipeg, Man., and Vancouver, B.C.

Bank of America Merrill Lynch, CIBC World Markets Inc. and RBC Capital Markets Corp. hosted the roadshow.

BAA Airports operates airports that include London's Heathrow Airport.

Connacher down

In the secondary market, Connacher Oil & Gas' Canadian-dollar 8¾% senior notes due 2018 and 8½% U.S.-dollar senior notes due 2019 traded at 91 bid on Friday, down 2 points on the week, a source said.

The issue priced on May 20, 2011 at par.

Connacher has been underway in a strategic review since it rejected an unsolicited takeover offer in December. One bond source said investors likely are growing tired of the extended review process.

The integrated oil company is based in Calgary, Alta.

Hydro-Quebec underperforms

In the provincial secondary market, Hydro-Quebec's 1.375% global notes due June 19, 2017 traded on Friday at 66 bps bid, a bond source said.

The issuer (Aa2/A+/DBRS: A) sold a $1 billion U.S. dollar-denominated benchmark offering of the notes at a spread of 64.65 bps over Treasuries on Tuesday.

Hydro-Quebec is a Quebec government-owned electric power generator and distributor.

Province of Alberta firms

The Province of Alberta's 1% notes due 2017 (Aaa/AAA//) were seen at 27 bps bid on Friday, a bond source said.

The province sold $600 million of the U.S. dollar-denominated notes on Thursday to yield Treasuries plus 29.45 bps.

New Brunswick tighter

The Province of New Brunswick's 3.55% debentures due June 3, 2043 were last seen in trading at 118½ bps bid on Thursday, a bond source said on Friday.

"There's currently no market on them," the source said.

The Province (Aa2/A+/DBRS: A) sold C$300 million of the 3.55% debentures due June 3, 2043 at a spread of 119 bps over the Government of Canada benchmark on Wednesday.

© 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.