American Express prices C$725 million, moves tighter; British Columbia's new bonds ease

By Rebecca Melvin

New York, June 1 - American Express Canada Credit Corp. priced C$725 million of fixed- and floating-rate notes in dual tranches Wednesday afternoon, and that paper was called a little bit tighter in the aftermarket as equity markets took a drubbing on weak economic data coming out of the United States, market sources said.

Canadian corporate bonds were mostly little changed, but in the high-yield market there was some selling around the edges, a Canadian sellsider focused on junk names told Prospect News.

Recently priced Flint Energy Services Ltd. slipped 0.25 point to 99.125 bid, 99.625 offered, for example.

In the provincial debt market, British Columbia priced C$500 million in a reopening that was deemed to have been something of a difficult sell given that investors wanted new, longer dated paper and there are new issues being talked that competed for attention. The new British Columbia paper widened slightly following pricing.

The Government of Canada priced C$700 million of 1.5% real-return bonds due 2044 at a regular quarterly auction at an allotment yield 1.02% and a price of 113.587.

The auction was also a reopening, which was what caused the bonds' high price.

Overall, the Canadian bond market was a little bit more active than previous sessions, with the provincial market in particular seeing increased action now that the budget season for provincial governments has concluded.

On the federal level, the budget process is ongoing, however, with a new budget expected to be unveiled on Monday.

Equity markets fell in both Canada and the United States after weak U.S. economic data.

The U.S.'s ADP employment report, published by Automatic data Processing Inc. and Macroeconomic Advisors, showed that U.S. private-sector jobs rose by just 38,000 in May, which was drastically lower than the 190,000 additional jobs that economists had expected.

Also Wednesday, the ISM manufacturing purchasing manager's index fell to 53.5 in May from 60.4 in April and below the 57 reading expected by economists.

The latest data follows a string of poor reports for May, including weaker regional factory reports and the Conference Board's sharply lower consumer confidence index.

AmEx prices, tightens

American Express Canada priced C$400 million of the five-year 3.6% bonds debt maturing June 3, 2016 at a spread of 135 basis points over Government of Canada June 2016 benchmark securities.

They priced at a slight discount to par at 99.973.

The company also priced C$350 million of three-year floating-rate notes maturing in June 2014 at par, matching the talked level of 105 basis points over the one-month Canadian dealer offer rate.

BMO Nesbitt Burns and RBC Capital Markets were joint bookrunners of the offerings.

"They have moved a little bit tighter now," a syndicate source said following pricing of the dual tranches.

British Columbia prices

The Province of British Columbia priced C$500 million of 2042 notes via BMO Nesbitt Burns, with RBC Capital Markets and CIBC also participating in the deal.

The new paper priced at 100.443 to yield 4.274%, a syndicate source said.

It widened out by 1 to 1.5 bps following pricing.

"It was not a clean deal; it was slow to sell," a syndicate source. He suggested that the reason was that investors had been looking for new December 2021 paper and that there was more investor interest in the 10-year space.

He said there are a number of other deals in the pipeline competing for attention, including the City of Toronto looking to do a long deal and a public-private infrastructure deal coming to market.

Nevertheless, activity in the Canadian provincial debt market has picked up of late. On Tuesday, the provinces of Manitoba and Ontario priced paper.

Ontario priced C$600 million in a reopening of 20-year paper.

British Columbia is the fifth largest province in Canada and about half the size of Quebec and a third the size of Ontario, so it issues paper at about a third of the pace that Ontario does, a provincial bond market source said.

"If anything the provincial market is more active in recent days now that the budget season is over and before summer starts," the source said.

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