Ontario prices 10-year notes; Merrill Lynch Canada sells asset-backed bonds; trading quiet

By Cristal Cody

Prospect News, Aug. 21 - Two Canadian issuers tapped the bond markets on Tuesday, while the possibility of a couple more "drive-by" deals grows as August winds down, according to informed bond sources.

The Province of Ontario reopened its 3.15% 10-year notes to sell C$750 million early in the day.

Late afternoon, Merrill Lynch Canada Inc. came to the market and priced about C$352.37 million in two pools of National Housing Authority mortgage-backed securities.

"It's not truly a corporate, but the excitement today is better than yesterday," one syndicate source said.

August typically is quiet for the Canadian debt markets, but a couple of corporate deals may price before the end of the month, another syndicate source said.

"It'll definitely be quiet over the next week or two," the source said. "We might be looking at some transactions - one or two depending on market tone. It would typically be a drive-by transaction more than anything."

Secondary activity stayed quiet on Tuesday, a bond source at another desk said.

"This week has been very quiet from a secondary trading perspective for sure," the source said.

The Markit CDX Series 18 North American investment-grade index eased 1 basis point to a spread of 99 bps.

The Markit CDX Series 18 North American high-yield index edged lower to 98.54 from 98.60.

Canadian government bonds closed mostly unchanged. The 10-year note yield closed 1 bp lower at 1.93%. The 30-year bond yield closed flat at 2.48%.

Ontario sells C$750 million

In the deal from Ontario (Aa2/AA-/DBRS: AA), the province sold C$750 million in a reopening of its 3.15% 10-year notes at 101.94 to yield 2.92%, an informed bond source said.

The notes due June 2, 2022 priced at a spread of 95 bps over the Government of Canada benchmark.

Scotia Capital Inc. was the lead manager.

The province first sold the issue on Nov. 3, 2011 in a C$750 million offering at 99.589 to yield 3.196%, or a spread of 87 bps over the government benchmark.

The issue was last reopened on July 17. The province sold C$750 million of the notes at 104.412 to yield 2.639%, or a spread of 100 bps over the Government of Canada benchmark.

Merrill Lynch Canada prices

Late afternoon, Merrill Lynch Canada raised C$352,365,924 in two tranches of National Housing Authority mortgage-backed securities, an informed bond source said.

In the first pool, Merrill Lynch Canada priced C$175,265,989 of 2.14% bonds due July 30, 2016 at 99.505 to yield 2.252%, or a spread of 82.6 bps over the Government of Canada benchmark.

Merrill Lynch Canada sold C$177,108,935 of 2.16% bonds due Sept. 21, 2016 in the second pool at 99.49 to yield 2.272%, or a spread of 84.6 bps over the government benchmark.

Both pools have weighted average life maturities.

Bank of America Merrill Lynch was the lead manager.

Merrill Lynch Canada is a unit of Bank of America Corp.

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