Canadian bonds: Long end of curve rallies on both sides of border; Manulife sells $1.1 billion

By Cristal Cody

Prospect News, Sept. 14 - Canadian bonds followed the lead of U.S. Treasuries in a rally on the longer end of the curve on Tuesday on speculation that the Federal Reserve will purchase U.S. debt to spur growth.

Canada's 10-year bond yielded 2.949%, down from 2.95%. The yield on the two-year bond moved down to 1.446% from 1.45%.

"I'm seeing an ever so slight sell-off in Canada's two-year," said Eric Lascelles, chief Canada macro strategist at TD Securities in Toronto.

"Whereas the 10-year is down by about 2 basis points to 2.94%," he said, "the short end of the sector is pretty close to flat and the long end managed a bit of a rally, consistent with the U.S."

U.S. Treasuries rallied on Tuesday, sending yields down. The Federal Reserve announced on Monday it would buy about $27 billion in debt in purchases that occur from Wednesday through Oct. 6. The Fed purchased about $17.64 billion of securities in August and early September.

The yield on the U.S. 10-year Treasury note fell to 2.68% from 2.75%. The yield on the two-year Treasury note dropped 4 bps to 0.49%.

In corporate debt, Manulife Financial Corp. priced $1.1 billion of senior unsecured notes (/A/A-) in two tranches, according to a market source and a press release.

The $600 million tranche of 3.4% five-year notes priced to yield Treasuries plus 200 bps.

In a second tranche, the company sold $500 million of 4.9% 10-year notes at Treasuries plus 225 bps.

Citigroup Global Markets and Morgan Stanley & Co. Inc. were the active bookrunners.

Proceeds will be used for general corporate purposes, including investments in subsidiaries.

In secondary trading, the Manulife's notes were active on the offer side, according to a trader.

The notes due 2015 were quoted at 197 bps offer. In late trading, the second tranche of notes due 2020 traded firmer on the offer side at 222 bps, the trader said.

The financial services company is based in Toronto.

Elsewhere, Montreal-based newsprint manufacturer AbitibiBowater Inc. announced it has started an offering of $750 million of senior unsecured notes due 2018. The sale is part of the company's reorganization from creditor protection in the United States and Canada.

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